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Exploring the risks and opportunities of China's lead in Renewable Energy Production

  • ED4S
  • Nov 5
  • 7 min read
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Executive Summary: 

This analysis examines the implications of China’s dominance in global renewable energy production for financial institutions in North America. It explores the opportunities for sustainable investment, risks in supply chain concentration, and emerging policy responses shaping the path to a decarbonized economy. 


Introduction: 

It is official, in early 2025, the global renewable energy production surpassed coal-based energy for the first time. This milestone marks significant progress in the energy transition and offers optimism for reducing CO₂ emissions and advancing towards a net-zero global energy mix. However, what does this number truly signify, and what can we expect from the future in financial investments and the energy sector? 


One of the major actors in the renewable energy industry is China, who has been the leader in solar panel production for around 15 years. The country exceeded its wind and solar capacity targets six years ahead of schedule and now produces about 85% of the world’s solar panels and 80% of its wind turbines. According to the World Economic Forum, China accounted for 63% of global renewable capacity expansion in 2023 and is projected to contribute 60% of new capacity by 2030.

 

China’s leadership in renewable energy production: the good and the bad

According to the International Energy Agency (IEA), global emissions from electricity generation are expected to plateau within the next two years, with growth limited to about 1% annually. While emissions in the EU and the U.S. continue to decline, this progress is largely offset by rising emissions in India and Southeast Asia. Despite these regional differences, the energy sector remains the largest global source of emissions, far surpassing other carbon-intensive industries such as manufacturing: this highlights why global emission-reduction policies should first and foremost target the energy sector. China’s monopolistic concentration has both positive and negative aspects that need to be demystified to better understand the potential of the global energy transition.


To begin with, similarly to any other products, solar panels follow market economics: the more units are produced and sold, the lower they are priced. This has allowed more countries to adopt renewables affordably while fostering technological innovation, improved performance, and quality through increased competition. This has greatly contributed to the prominent position that renewable energy has been gaining in the energy sector. 


However, there are also important risks to having such a concentrated global supply chain. Indeed, economists warn that the dependence on a single dominant producer increases exposure to potential supply disruptions, high price volatility, and geopolitical tensions. Furthermore, China’s extensive manufacturing has also put the country at the verge of overcapacity, with production now outpacing global demand, which could lead to industry price wars and financial loss fragilizing the value chain for importing countries. Concerns over human rights and labor violations in the production of solar panels also persist: reports have linked parts of the solar supply chain to forced labor in China’s Xinjiang region, raising ethical and ESG compliance issues for global buyers and leading to large reputational risk for investments in this industry, for instance. In the USA, the Uyghur Forced Labor Prevention Act (UFLPA) is a regulatory framework that was been put in place to prevent the use of forced labor in value chains, further increasing the risk of non-compliance associated with such a concentrated value chain for financial investments. 


Finally, there remains the underlying concern regarding the emissions due to the production of the solar panels; although it is crucial to note that the production of renewable energy will always have a lower carbon intensity compared to coal generated electricity, for example. As expressed by the director of the China Climate Hub, Mr. Li Shuo, China positions itself as a reliable and constructive partner in building a community with a shared future for mankind. However, even if the statistics aforementioned give the impression that the Chinese energy mix is an ideal example to follow, it remains important to remember that coal still represents 80 % of its energy mix in 2024.  


To conclude, China’s industrial strength has accelerated the global clean energy transition, but its dominance and ongoing coal reliance present both systemic and sustainability challenges. It is still important to remember that China has also been responsible for the largest share of fossil fuel emissions for the past 20 years, and the production of renewable energy has only been an addition to current coal-powered electricity production. 

Are there other players that exist in the industry to which investment could turn to in order to mitigate these risks? India is one of the emerging renewable energy production leaders, although its growth remains intrinsically embedded with China’s, as it is one of the largest importers of Chinese solar panels. Other major importer countries include Pakistan, Saudi Arabia, and the Netherlands. According to a report by Bloomberg, notable markets include Saudi Arabia, which signed a deal within Europe, Middle-East and Africa to build a renewable energy manufacturing plant; Germany, which has the largest wind investments after China and is building a strong solar portfolio; and finally Turkey, which has increased solar investments by 12% in the first half of 2025. Each of these players is leveraging this evolution of the market to position themselves as future energy leaders.


Why should Canadian and American financial Institutes care? 

On global markets, renewable energy remains a high-growth sector, with global capacity expected to double by 2030 (IEA), placing it as a very promising investment. Many Canadian and North American financial institutions have included solar panel production in their portfolios in various types of assets.  


For instance, the Caisse de depots et placements du Quebec (CDPQ) acquired an 80% stake in a solar powered generation plant in 2024 as part of their decarbonization strategy. The Ontario Teachers’ Pension Plan invested in Susten, one of India’s leading renewable energy platforms, supporting the country’s efforts of expanding renewables and addressing its dependence on coal and oil imports. Finally, Blackrock continues to expand its cross-border renewable investments, including solar panel expansion, to diversify from local assets and mitigate local political risk. These Canadian and American investments are examples that demonstrate the participation of financial institutions in the renewable energy sector and depict how each could be highly affected by a drastic increase in tariffs, or other market-related risks. Beyond investments, financial institutions in North America should keep a close eye on this emerging market as it is promised to grow, and it has the potential to change the dynamics of the energy sector in the long term.


Furthermore, there is an increasing trend of regulations that are reinforcing disclosure requirements and encouraging companies to integrate renewable energy as way of reaching their net-zero commitments. This will not only stimulate the renewable energy sector but also encourage investments towards renewable energy projects as the market develops. For example, in Europe, the EU Carbon Border Adjustment Mechanism (CBAM) will bind importers of carbon-intensive products, including electricity, to disclose and monitor emissions before being able to post them on the market, starting in January 2026. This will increase disclosures and better comparability overall, thus potentially attracting investments. In Canada, The Clean Technology Investment Tax Credit proposes tax credits for capital investments towards clean energy in an effort to increase renewable energy use and project development. These examples illustrate an increasing importance in regulations that could drive capital towards the renewable energy sector, perhaps giving competitive edge to financial institutions that follow this trend. 

 

Conclusion 

As global renewables cross a historic threshold, the strategic imperative for North American institutions is not whether to invest, but how to navigate supply concentration, ethical risk, and geopolitical volatility while financing the next phase of decarbonization. The fact that renewable energy has overtaken coal marks a historic achievement and a turning point for global sustainability. Moreover, it should be evident that this progress should not become an excuse to consume more energy, but rather as an opportunity to deepen efforts and reduce the strain on electricity demand. Resorting to the use of renewable energy is only a fraction of what should be done to reach a decarbonated economy. 


Renewable energy represents both a challenge and an opportunity across industries and is becoming increasingly central to ESG compliance. Financial institutions and corporations can leverage renewables to manage physical and transition risks while embedding sustainability into core strategy. To fully capture this potential, it is essential to invest in ESG and sustainability training for employees and leadership. These programs help leaders identify material risks, transform them into strategic opportunities, and navigate key regulatory frameworks such as the TCFD and the SFDR. This also enables organizations to capitalize on opportunities in renewable energy while enhancing compliance and long-term value creation. A comprehensive understanding of ESG issues is therefore essential to fully integrate them into business strategies, unlock new sources of value, and transform sustainability into a true competitive advantage. 

 

Bibliography  

 

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