Can China clean up its energy act, and can the U.S. go renewable without China? — Q&A with Michael Davidson

Business & Technology

A conversation with Michael Davidson, a scholar and engineer with deep expertise in renewable energy in China, India, and the U.S.

Illustration for The China Project by Nadya Yeh

Professor Michael Davidson is a scholar and engineer who researches the engineering implications and institutional conflicts of large scale renewable energy deployment. Now based at the University of California San Diego, he has worked on both the technological and policy aspects of clean energy, especially in China, India, and the western U.S.

I asked him all about solar panel supply chains, China’s adoption of clean tech, how Beijing’s fraught relationship with Washington will affect the global roll out of sustainable power and transport, and more.

We chatted by video call in February. This is an abridged, edited transcript of our conversation.

—Jeremy Goldkorn

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There are many tropes that are prevalent in Washington D.C. right now that I think of as “hawk clichés” about China. But there are also what I consider “engagement clichés.” The one I hear the most often is, “The U.S. and China need to work together on climate change and pandemic prevention.” And I always find myself thinking that China is now not at all interested in cooperation on pandemic prevention, and the biggest obstacle to climate change action in the U.S. has nothing to do with China: it’s domestic politics and the fact that this country has a significant climate change denial movement, and very powerful industry lobbyists.

Persuade me otherwise.

Climate change policy and the strength of the policy is driven by a lot of factors. Certainly domestic interest groups and interest politics in the U.S. are a huge factor determining how quickly we engage in the low carbon transition. But we don’t engage in this in a vacuum.

The clean technologies that have dropped in cost by 90% over the last decade or more are very globalized. So, we’re benefiting from very low cost integration into global supply chains. And that has been the result of relatively unfettered trade in these technologies, as well as in their development.

So, yes, while we need to do a lot of work here at home, we’re still in this boat together, and there’s a large global problem that we need to address in order to continue to provide solutions and to continue to push other countries to make ambitious climate policies.

In terms of solar technology specifically, can we think of it a little like semiconductors in the sense that it’s almost impossible for one country to make everything?

Could you take me through the supply chain for a solar panel that ends up on my roof in Tennessee?

Yeah. We’re very dependent on global supply chains for virtually all clean energy technologies, including the solar panels that go on your roof.

The lifetime of a solar panel begins with silicon which is very abundant. It needs to be processed into polysilicon, which is a higher purity grade of silicon. Somewhat less pure than what goes into semiconductor chips, but still requires some processing. And then it’s formed into ingots and then wafers, and then into cells, and then finally packaged together into modules or panels.

If we look upstream, China controls about 90% to 97% of the polysilicon, ingot and wafer production. Greater than 90% of all of that’s being done in China.

That’s not because they have the silicon in the ground, but because they have the factories to process it?

Silicon is abundant. Silicon is found all over the earth’s crust. This is not a rare earth mineral. Actually, the U.S. was a huge exporter of polysilicon during the early Obama years. And essentially one of the repercussions or unintended side effects of early trade remedies against Chinese solar panels was that China put retaliatory tariffs on their imports of polysilicon, which squeezed out the U.S. guys, and led China to develop its own polysilicon industry, in Xinjiang with all of its serious human rights concerns.

This is a very energy-intensive, economies-of-scale industry, with, generally speaking, very low profit margins. China tends to excel in finding very low cost ways of producing those upstream. What we’re seeing now is more diversification in the downstream components of the solar panel process, which would be the cells and modules.

So, the U.S. could actually make its own solar panels, from getting the sand out of the desert and turning it into polysilicon, all the way through to the solar panels on my roof, but without China it’s just going to be a whole lot more expensive. Is that about right?

With solar, it is not the case where there is a very sophisticated piece of technology the rest of the world couldn’t replicate with time. But the challenge is that we don’t have a lot of time.

The U.S. could certainly build up domestic supply chains, but whether we could do that on a scale and with the urgency needed to deploy them to address climate change I think is a big question. There are already some plans for integrated solar plants in the U.S. that would basically do the whole supply chain that I just described. In contrast, most of the solar plants recently built in the U.S. are on the cell or module assembly.

So, they’re importing most of that already processed stuff and then they’re slapping it together. These are the plants that you see, mostly foreign suppliers, setting up shop here. Integrated plants are being proposed now with the Inflation Reduction Act subsidies, but there’s no doubt that it will increase the cost of producing those solar panels.

And there’s also a significant question as to how quickly those could ramp up to meet the demand of solar panel deployment, which needs to grow considerably over the next decade and beyond.

We recently published a piece by Deborah Seligsohn that says, and I’m paraphrasing, that people in the U.S. tend to think mostly of electric cars when they think of the electrification of transport, whereas China’s doing a whole lot more, including electrifying the train system completely, two-wheeled transport, and electric delivery vehicles. And this is showing the way to electrification for the rest of the world.

On the other hand, last year we published an essay by Richard Smith that argues, among other things, that China simply cannot decarbonize because most of the electricity powering the trains and cars and scooters is going to be generated by coal.

How would you rate China’s success in applying new technologies and how this will affect climate change?

As you know, China is a very big country and lots of things can happen at once.

And so you can have the expansion of low carbon electricity at an unprecedented scale, and electrified transport. And you can also have expansion of carbon-emitting coal plants. Both of those things can coexist.

My take on this is that we’ve seen, over the last two years, very high profile statements from the top leadership, from Xí Jìnpíng 习近平 that climate change action is an important national priority, and this includes setting in place an unprecedented net-zero goal by 2060. This has been reflected in all sorts of institutions. Every state-owned enterprise now that touches carbon needs to come up with a carbon peaking and carbon neutrality plan.

Government agencies are coming up with long-term plans to achieve these goals. There are very high level working groups being chaired by vice premiers and others to address these issues.

But that’s a long-term goal, right? So I think it’s fairly safe to say they’ve set a goal that has shifted the mindset of many of these institutional actors, but we still have many medium-term challenges. And in China, one of the biggest medium-term challenges is maintaining energy security while engaging in this low carbon transition. So, we’ve seen power shortages in 2021, and then less extensive ones last year. Those are top of mind now for planners in Beijing, and that’s causing them to maybe not reassess, but definitely think about what is the exact pathway to achieve those low carbon targets.

That does have a very important intersection with the transportation sector because China is very dependent on imports of gas and oil. So, fossil fuel-wise, China has somewhat more robust security on the coal side, but is very dependent on imports of gas and oil. So, transitioning away from gas powered cars to electric cars would bring many energy security benefits. I think for those reasons, we’re seeing a significant amount of electric car deployment in China. Another component of this is…you mentioned two wheelers: China is not wedded to a 400-mile-range four-wheel passenger or truck electric vehicle future. It can have many different types of electrification in the transportation sector. And that is what has allowed many cities in China to deploy electrified transportation much more quickly than what we see in the U.S.

Then one final point is that electrification of transport requires charging infrastructure. Charging infrastructure requires a stable grid. And some amount of more sophisticated charging and controlling infrastructure and equipment, that China’s also been racing ahead mostly through some of its larger state firms.

I think there are a lot of reasons why China is accelerating very quickly in the transportation sector. I think those long-term trends are very clear, but in the medium term, there are a number of challenges that are going to have to be reconciled.

How big of a problem do you think it is that China has become such a dominant force in electric vehicles and in batteries? It doesn’t seem likely that there’s going to be any real warming of ties between China and the U.S. any time soon. Is it highly likely that the protectionist behavior we’ve seen in the U.S. and attempts to isolate China are going to continue, and China’s going to continue to reciprocate?

It’s certainly worrying if the bilateral tensions spill over and affect the proper functioning and growth of these needed low-carbon technologies. I think that’s something that we recognize more broadly about the U.S.-China relationship, which is that climate action and climate cooperation isn’t really about having a nice joint statement at the annual climate conferences, but it’s actually reconciling the fact that climate change is now infused throughout the relationship on trade and technology, supply chain, security.

I am worried about this because there is a huge need to develop these technologies, to continue to lower the cost of these technologies, and it’s certainly clear that throwing up more and more barriers and attempting to decouple the two economies will have very negative impacts on that. So, I am very worried about that. There are different potential avenues, and I think firms are readjusting to the new reality.

For example, the Inflation Reduction Act (IRA), which sets in motion a series of domestic content requirements to receive certain subsidies, those have prompted more onshoring announcements of battery manufacturing, in addition to the electric vehicle (EV) manufacturing side, including foreign firms.

What is certainly up in the air right now is whether or not Chinese firms would be eligible to do that. I’m sure if you zoomed back more than 30 years, you would’ve had similar conversations about Japanese firms and the kinds of competition that the U.S. manufacturers were facing from Japanese firms, and whether or not Japanese automakers setting up plants in the U.S. would be welcomed with open arms because they’re generating U.S. jobs or whether because they’re foreign, we would prefer to not have them.

A similar sort of discussion is now taking place with respect to China. And we saw, actually very recently, a potential battery plant proposed by CATL, China’s largest battery maker, actually got scuttled. There are no formal regulations or restrictions in the IRA tied to preventing specifically Chinese firms from operating here, but there may be some other restrictions as we go forward. This is really important for a number of reasons, but one very crucial reason is that the Chinese have gone all-in on a different technology pathway than what is dominant in the U.S., specifically a cobalt free lithium-ion battery. And so we were talking about minerals, in terms of rare earth minerals that go into batteries, particularly for EVs, you’re talking about lithium, you’re also talking about cobalt.

Both of those have their own sets of challenges with mining and refining. Cobalt has very large reserves in Africa in the Congo, and Lithium in South America as well as parts of Africa. And so, taking cobalt out of the equation of restricting the growth of batteries could be hugely important for deploying EVs at a larger scale.

China went all in on this technology, whereas other automakers have gone all in on the traditional lithium-ion technology that includes cobalt. Cobalt-free batteries could be one of the most important future technologies, and if it’s going to be integrated into the U.S. EV market, it may be really important to have Chinese participation at some level.

You also work on India. How does India compare with China in terms of its electricity infrastructure and the conversion to green alternatives for power production and for transport?

India faces some similar challenges to China 10, 15 years ago. There are these new technologies that are coming online, but there is significant need for increased power capacity, and there’s also easy access to very low-cost coal. And there’s also just this really large incumbent coal industry which affects clean energy and climate policies in India.

Different from China’s situation back then though, India does have the opportunity to kind of jump in when these low carbon technologies are very cheap and potentially push out some of these older coal technologies.

India has also embarked on its own domestic manufacturing strategy, which so far has not met with a lot of success. They’re attempting to both wean their market off of Chinese-made solar panels and develop their own solar panel industry, for example. But it’s actually been somewhat challenging to scale that up in a reasonable timeframe at a reasonable cost.

There’s also this geopolitical trend which drives India and China further apart, and India and the U.S. closer together, which is going to have long term effects on the technologies that are available to Indian developers as they try to meet these clean energy goals.