In the 1980s and 1990s, Europe was at the forefront of renewable energy innovation. From Danish wind turbines to German solar technologies, the West pioneered many of the clean tech breakthroughs the world uses today. But by 2026, that leadership has shifted dramatically — and almost entirely — to China.
China now produces over 90% of the world’s solar panels and controls more than 80% of each key stage of solar panel manufacturing. In batteries, wind turbines, and rare earth processing, China has built unshakable dominance. The question is: how did this happen?
Innovation Without Industrial Policy
While Western innovators developed technologies like PERC solar cells and gearless wind turbines, their governments failed to implement protective industrial policies. Instead, countries like Germany and the US embraced globalisation, selling production lines, equipment, and licenses to Chinese companies — often in exchange for short-term market access.
By contrast, China’s long-term industrial strategy, exemplified by the “Made in China 2025” plan, focused on capturing entire supply chains. It incentivised technology transfer, invested heavily in manufacturing, and provided generous financing to homegrown companies.
One early example: Goldwind, now the world’s largest wind turbine manufacturer, acquired key IP from Germany’s Vensys in 2008. Suntech, a solar pioneer, grew with state support and listed on the NYSE as early as 2005 — signaling China’s confidence in global markets.
Overcapacity, Undercutting, and Collapse
With massive investment in infrastructure and automation, Chinese firms quickly undercut their Western rivals on price. European solar leaders like Q-Cells and Meyer Burger collapsed or exited manufacturing entirely, unable to compete with Chinese products offering 100-day payment terms and lower costs.
Even defensive tariffs — such as the EU’s 2013 anti-dumping measures — came too late. Meanwhile, US efforts backfired: after imposing tariffs on Chinese panels, China responded with duties on US polysilicon, crippling American upstream suppliers.
By 2018, China accounted for 60% of global solar panel production, rising to over 90% by 2025. Western industrial policy remained fragmented, reactive, and often politically blocked — such as the delayed “Made in Europe” content targets in the EU.
What Now? Picking Strategic Battles
Today, the EU and US are playing catch-up. The EU has introduced faster access to funds, trade probes, and green industrial incentives. Yet initiatives like Sweden’s Northvolt — once seen as a European battery hope — collapsed in 2024, highlighting the risks of underfunding and inconsistent support.
Experts argue that the West must now “pick its battles”, focusing on niches less vulnerable to commoditisation. Promising areas include:
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Advanced solar technologies like perovskite cells
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Electricity grid equipment such as transformers
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Geothermal and next-gen nuclear
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Offshore wind, which demands local manufacturing
However, even in perovskite research, European firms like Oxford Photovoltaics face being outspent by Chinese giants like Longi. With limited access to the Chinese market, many resort to licensing deals — effectively surrendering growth to Chinese partners.
Lessons for Strategic Resilience
The West’s clean tech setback is a case study in the cost of strategic complacency. Innovation alone is not enough. Without a coordinated industrial strategy — supported by long-term funding, market protection, and a clear vision — first-mover advantage can be lost.
China’s dominance was no accident. It was built through planning, scale, and relentless execution, while the West was still debating the virtues of market liberalism.
To regain competitiveness, Europe and the US must align industrial policy with climate goals — and treat renewable technologies not just as environmental assets, but as strategic economic infrastructure.