Sustainable Investing
Chasing the sun: China leads global race to build solar power
4 min read 20 Aug 25
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China’s solar power capacity has increased rapidly in recent years and it is now racing ahead of the rest of the world. Michael Rae, Global Equities Fund Manager, examines the factors behind this growth and considers how differing regional policies are resulting in a multi-speed energy transition.
Few trends in the global energy landscape catch the eye like China’s solar capacity growth. Just 15 years ago, China ranked eighth in the world for annual power generation from solar, behind the likes of Germany, Spain and the US. Today, it is leading the way, by a considerable distance1.
The country’s capacity build-out began in earnest in the mid-2010s, but in the past few years it has broken all records. Consider that in 2023 and 2024 China added more solar capacity than the rest of the world combined.
“In 2023 and 2024, China added more solar capacity than the rest of the world combined.”
China vs the world
In Europe, we look to Spain and Germany as solar leaders and they can justifiably be proud of their history. However, at the current pace of installation, China adds capacity equivalent to Germany’s total solar fleet in just four months. Adding Spain’s total takes half that time.
The supporting factors behind this are clear: China dominates the solar equipment manufacturing value chain, rural land is abundant, solar irradiation levels in some regions rank among the best in the world, and the country’s five-year policy planning cycle can encourage private sector participation and provincial support via guaranteed offtake prices (“feed-in tariffs”2) and capital grants.
Solar power consumption growth also requires an electricity grid that can match the capacity increase. While this has been a bottleneck for many countries, China has been investing significantly in grid build-out over the last 10 years and now boasts arguably the most robust grid network in the world.
Yet attributing such efforts only to a push to ‘green’ the Chinese economy is an over-simplification. Data for 2024 shows China is taking an ‘all-of-the-above’ approach to meeting rising energy demand, with coal, natural gas, hydro and nuclear power generation also growing materially.
The current five-year plan provides for renewables meeting 50% of incremental demand growth3 and it is notable that China is now phasing out feed-in tariffs for new solar projects, focusing instead on incentivising consumption via renewable obligations.
Multi-speed energy transition
What’s clear though is there is now a spectrum of approaches to the energy transition across the world’s major economic regions. The US has now all but repealed its landmark renewable subsidy program (the Inflation Reduction Act of 2022), focusing instead on nuclear and gas-fired power generation to meet demand growth.
Sources of new power supply are particularly topical given some commentators estimate US power demand growth over the next decade will exceed the last three decades combined, owing to data centre construction and re-shoring of manufacturing.
Policymakers in Europe continue to battle to cut down bureaucracy and construct an economically sustainable system of subsidies, but it seems fair to say the response from industry has so far been more evolution than revolution. This stands out given Europe’s early leadership in renewables.
“Policymakers in Europe continue to battle to cut down bureaucracy and construct an economically sustainable system of subsidies.”
India, too, has set aggressive targets of roughly quadrupling its solar capacity by 2030, taking advantage of its superior irradiation levels, but grid integration and complexity present significant barriers. India will be particularly interesting to watch given it is expected to exhibit among the highest absolute levels of power demand growth of any country in the coming years.
How the solar installation chart will look a decade from now is an open question, but the overriding conclusion is the energy transition remains highly complex and multi-speed across regions. There is no one-size-fits-all answer and, as the data from China show, widely-held expectations can be wrong by an order of magnitude.
1Energy Institute, ‘Statistical Review of World Energy 2025’, (energyinst.org), June 2025.
2The agreed purchase price for the electricity generated.
3Economic Daily, ‘The development of renewable energy in the 14th Five-Year Plan has accelerated’, (gov.cn), June 2022.
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