A Journal of Analysis and News
By Azhar Azam
In 2025, China’s electricity demand rose about 5%. Clean power expanded fast enough to meet that surge, pushing thermal generation, mostly coal-based, down 0.7% — the first annual decline in a decade, according to Ember’s China Energy Transition Review 2026. This marked a significant departure from 2015, when thermal generation fell largely because electricity demand barely grew, rising just 0.5%, the slowest pace since 1974.
Beyond electricity, rapid transport electrification is also reducing domestic oil demand. Ember notes that electric vehicles (EVs) are displacing around 0.4–0.5 million barrels of gasoline a day, while broader estimates put avoided oil demand at around or above 1 million barrels a day — roughly 365–400 million barrels a year. That is more than double the 179 million barrels of government-held strategic oil inventories in OECD Europe at the end of 2025.
The findings complicate a debate usually framed as a purely industrial problem. The United States and European Union (EU) see Beijing’s dominance in solar panels, batteries and EVs as a source of economic and strategic vulnerability — manufacturing capacity built on a scale that domestic demand alone can’t absorb, leaving foreign markets to take the surplus.
Yet the overcapacity triggering these concerns is also accelerating the global clean-energy transition by making these technologies cheaper and more widely available, as reflected in global trade of clean-tech products that reached an estimated $479 billion in 2025.
Much of this trade has been driven by China’s production. In sectors such as EVs, Beijing’s manufacturing has outstripped domestic demand, putting downward pressure on global prices. These cost declines have, in turn, supported faster electrification around the world.
China’s manufacturing surplus shouldn’t be viewed in isolation. The same manufacturing capacity that has created excess supply is also supporting a rapidly expanding domestic clean-energy market. Over the past decade, China has added almost 1,700 gigawatts of wind and solar capacity — more than its entire power system in 2015. In 2025, battery-storage installations grew 84%, with China accounting for roughly 60% of new storage deployed worldwide. Electric trucks reached about 26% of new sales, a share leading European economies have just achieved in passenger cars.
Deployment at such a scale doesn’t mean all that capacity is being fully absorbed. In the first half of 2025, China’s solar curtailment rate rose to 5.7% and wind curtailment to 6.6%, with curtailment in western regions such as Tibet, Xinjiang and Qinghai exceeding the country’s 10% tolerance, according to national grid data. Grid bottlenecks and limited local demand have made it difficult to fully use some of the electricity generated by new renewable capacity.
Even so, clean technologies are beginning to change China’s energy ecosystem. Ember finds that coal generation has been broadly flat on a 12-month moving average since early 2024. It marks an important shift: China’s clean-energy buildout is quickly displacing fossil-fuel generation.
Beijing is now responding to the industrial complaints created by overcapacity. On September 1, a new consumption tax on mainstream batteries took effect, with equivalent levies on solar cells due in 2027. These tax policies may help to weed out inefficient capacity, force the exit of low-tier players and ease international trade tensions arising from overproduction.
Meanwhile, the impact of falling costs is reciprocated in affordability — one of the main constraints on decarbonization. For many emerging and developing economies, limited fiscal space is the major barrier to energy transition. As prices drop, lower-cost imports have expanded their access to clean technologies.
Trade restrictions have had limited effect. Rather than curbing China’s clean-energy exports, tariffs and industrial-policy tools introduced by the United States and EU have redirected a growing share of trade flows toward developing markets. From EVs in Ethiopia to discounted solar panels in Pakistan, China’s industrial scale has lowered costs across many developing economies, contributing to global emissions reductions.
As clean-energy investment expands, China’s dominance is perceived differently across regions. Many developing economies view it as an opportunity to gain access to clean technologies at lower costs; advanced economies associate Beijing’s scale with industrial overcapacity.
For instance, solar deployment in the EU has grown strongly in recent years, but the bloc still relies heavily on China for solar panels and key upstream inputs. The same pattern is emerging in EV batteries: EU efforts to restructure and localize production have eased some overcapacity risks while also increasing reliance on Chinese battery suppliers.
This creates a policy trade-off for Europe — greater industrial autonomy would strengthen long-term supply-chain resilience but is likely to raise costs and slow the pace of decarbonization, while continued reliance sustains faster deployment but leaves Europe exposed to ongoing dependencies.
The United States faces a similar challenge. Despite tax credits under the Inflation Reduction Act, China accounts for the majority of global clean-tech manufacturing capacity. Washington is scaling deployment in areas such as battery storage, emerging as second to Beijing, but as CSIS analysis highlights, expansion in downstream segments does not resolve upstream constraints such as limited domestic reserves and critical mineral processing capacity, limiting the scope of full self-sufficiency.
India follows a different but related trajectory. Its renewable energy installed capacity has expanded quickly, but the scale gap with China is substantial: Beijing added 315.1 gigawatts (GW) of solar capacity in 2025 versus New Delhi’s 37 GW.
China’s clean-tech overcapacity has become an essential feature of the global energy transition. While criticized as trade distortion, it has contributed to significant cost reductions in solar, battery and EV technologies, accelerating their adoption across developing, emerging and advanced economies. Yet the same concentration that drives lower costs also generates structural vulnerabilities, increasing exposure of importing economies to supply-chain disruption, geopolitical friction and industrial dependence — as reflected in policy responses from Brussels and Washington.
China’s excess manufacturing capacity and rapid domestic deployment actually are mutually reinforcing. Producing more solar panels, batteries and EVs has intensified competition and pushed prices down. Those lower prices have made it easier to deploy the same technologies at home and abroad. China’s manufacturing scale is therefore doing two things at once: creating concerns about excess capacity while also making clean technologies cheap enough to expand rapidly, including inside China’s own energy system.
Beijing’s role in the global energy transition is unlikely to diminish in the near term. For policymakers around the world, the challenge is not just to reduce reliance on Chinese clean technologies, but to harness the benefits of Beijing’s scale to strengthen energy security and accelerate electrification without deepening strategic dependencies.
Azhar Azam is a geopolitical analyst with a focus on economy, climate change and international security. His work has been published in several global media outlets including Al Jazeera, Cambridge MENF/Manara Magazine, South China Morning Post, Asia Times and Express Tribune.
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Azhar Azam is a geopolitical analyst with a focus on economy, climate change and international security. His work has been published in several global media outlets including Al Jazeera, Cambridge MENF/Manara Magazine, South China Morning Post, Asia Times and Express Tribune.
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