The Royal United Services Institute (RUSI) has argued that the UK risks becoming “too reliant” on China for its renewable transition.
Detailed in the defence and security think tank’s new report, amply named New Energy Supply Chains: Is the UK at Risk from Chinese Dominance, China’s early move in the processing of many of the minerals used in net zero technologies has meant that it has taken a huge share of the global market and many countries risk becoming too reliant as a result.
According to the report, China has a “near monopoly” in the mineral processing supply chain taking up a staggering 80-100% market share. Another supply chain is rare earths, which are often used to manufacture the permanent magnets in wind turbines and electric vehicles (EVs).
Batteries, wind turbines and solar are also cited as technologies that the UK relies heavily on China to develop, prompting concerns, particularly in the wake of the Russian invasion of Ukraine which saw energy prices skyrocket across the globe primarily due to a reduction in the supply of gas and oil from Russia.
For the solar industry, China also has a “near monopoly” on the production of polysilicon, silicon wafers and silicon cells, RUSI said. There are also very high concentrations of up to a 60–80% market share in many other elements of these supply chains.
Expanding renewable infrastructure could increase reliance on China
To highlight the predicament here for the UK’s energy transition, it is important to acknowledge the expected demand for renewable infrastructure by 2035.
The growth in infrastructure in England and Wales for offshore wind by 2035 could be up to six times. For solar this figure stands at five, for interconnectors it stands at three, and for battery storage up to ten times.
For EVs and heat pumps the anticipated growth is even steeper. EVs in just the Midlands, Southwest England and Wales could reach up to 23 times the current capacity whereas heat pumps could soar in the same areas by up to 13 times the current capacity. With China responsible for an 80% market share of lithium-ion supply chains, and with many countries scaling battery technologies, it is clear to see where issues could lie.
As all of these technologies require imported goods and materials from China, a deterioration in relations could prove catastrophic to the UK’s net zero journey.
RUSI outlined that the biggest risk for the UK is shortages of critical materials. With shortages widely forecast, and with China’s control of mineral processing and refining, it means that the country would play a central role in the allocation of scarce goods which could break into a political and diplomatic issue.
History also indicates that China would be prepared to make these tough decisions. An example of this is China’s ban on Australian coal. Commenting on the, the NUSI report said that “where a security threat is perceived, Beijing will take action, even if it will cause damage to the Chinese economy”.
To decrease the UK’s reliance on China for many of the renewable supply chains, the RUSI has outlined that there must be “action across the entire supply chain: accelerating investments in upstream mining developments, diversification of processing and refining, and recycling of critical minerals and materials”.
There is however a realistic outlook on the use of China to support the UK’s net zero transition. Th report reads that “excluding China completely from the UK’s new energy supply chains is unrealistic and would be counterproductive for the UK’s net zero targets.”