China’s role in the next phase of the energy transition: Contributions to global niche formation in the Concentrated Solar Power sector

Highlights

• China has recently launched a support policy for Concentrated Solar Power.

• Sector formation was strongly rooted in domestic knowledge and other resources.

• China may no longer be a follower country in the next phase of the energy transition.

• China’s industrial path formation environment differs from that seen in the OECD.

• China may support industrial paths trajectories unlikely to develop elsewhere.

Abstract

The role that emerging economies, and China in particular, play in the global energy transition appears to be transforming. Transition literature to date characterizes the formation of cleantech sectors in emerging economies as being heavily dependent on foreign inputs of knowledge and other key resources. This article argues that in the, currently unfolding, next phase of the global energy transition, Chinese actors may play a more central role in global niche development for high-tech industries, including in constructing innovative and effective socio-technical configurations. This argument is illustrated with a case study of the Chinese Concentrated Solar Power industry, which is found to have developed largely independently of foreign resources. The case is used to highlight a number of specificities of the Chinese environment that set it apart from niche formation environments in OECD countries, and may allow China to open up technological trajectories unlikely to develop in those OECD countries.

Introduction

Preventing dangerous levels of climate change requires deep decarbonization of global systems for the production and consumption of energy. An ongoing transition to cleaner sources is particularly visible in electricity production, where onshore wind and solar PV in particular are starting to attain substantial market shares in a number of countries. Transition scholars have argued that transition dynamics in the energy sector are now entering a new phase in which, amongst others, the diffusion of renewables is accelerating, support policies are re-aligned from R&D and price support towards system integration and complementary technologies, and renewables are starting to push out rather than add to conventional sources of power generation (Markard, 2018; Smil, 2016). The foundational concepts of the field would accordingly have to be adapted or reformulated to explain these new dynamics. This paper embraces this argument, but highlights an area that has thus far mostly been overlooked in the debate about the next phase of transition concepts: the increasingly central, and potentially transformative, role that actors in emerging economies could have.

In the first phase of the global energy transition, early stage R&D, as well as market and industry formation around renewable energy technologies was largely concentrated in advanced economies. Only in later stages did renewable energy industries like wind and solar PV spread to emerging and developing economy countries (Lema and Lema, 2012; Quitzow, 2015). China is a case in point, having grown from a marginal role in renewable energy industries around the year 2000, to the worlds’ largest market and equipment manufacturer for wind and PV in recent years.

Much scholarly attention has been focused on the conditions that enabled this shift of manufacturing industries towards China and other emerging economies such as India, South Korea, Brazil, etc. (Binz and Anadon, 2018; de la Tour et al., 2011; Fu and Zhang, 2011; Gosens and Lu, 2013; Lema and Lema, 2012; Lewis, 2007; Quitzow, 2015). These studies have in large part re-iterated conclusions from literatures on National Innovation Systems or on catching-up. They have pointed out that China and other emerging economy countries started to gain market shares in the wind and solar PV industry, when these industries had entered a relatively mature stage in their global life-cycle, i.e., when dominant designs had emerged, and substantial experience and industry leadership had been built up elsewhere (Malerba and Nelson, 2011; Mathews, 2006; Shin, 1996). These studies have further stressed the importance of domestic capability formation through the absorption of foreign technology and experience (Abramovitz, 1986; Ernst and Kim, 2002; Gereffi et al., 2005; Lundvall, 1992; Perez and Soete, 1988).

The next phase of the global energy transition is expected to see accelerated deployment of wind and PV, which are relatively mature technologies by now (Markard, 2018). A new generation of renewable energy technologies, including Concentrated Solar Power (CSP), tidal & wave power, enhanced geothermal, and thin film, perovskite and organic PV, are still in earlier stages of development, but may see strong future growth, and come to support or compete with current mainstream renewables (Hussain et al., 2017). Should history repeat itself, development and deployment of these technologies would remain limited to advanced economy countries for the foreseeable future, and shift towards emerging economies only after a lengthy process of technological maturation.

There are, however, indications that this is not what is happening in a number of next-generation renewables, and with CSP in particular. This sector is currently in its formative stage, with only small niche markets in a limited number of countries, and research programs in place to tackle fundamental engineering challenges even in advanced economy countries. Nevertheless, a demonstration program is underway in China, with support for 20 CSP projects with a total capacity of 1349 MW, making China one of the largest current CSP markets (NEA, 2016; SolarPACES/NREL, 2018).

This article will highlight the divergence from traditional catch-up development in the Chinese CSP sector by analysing the relative importance of domestic and foreign elements in its early stage CSP industry formation. Similar to recent analyses on transnational innovation dynamics in emergent cleantech sectors (Andersson et al., 2018; Binz and Anadon, 2018), we will trace the origin of four industrial path formation resources (knowledge, market demand, investment, and legitimacy). This is done through a review of Chinese government policy and industry reports, the creation of a database of actors involved in pilot and demonstration projects, and a series of interviews with Chinese CSP experts in academia, industry, and government.

Our findings show that Chinese CSP sector development has occurred largely independent from foreign innovation system resources. Technological development, as well as pilot and demonstration activities are strongly rooted in domestic knowledge bases and technological capabilities of local firms. The bulk of the project developers, design institutes, EPC contractors, equipment manufacturers and financiers are domestic. Domestic markets are being actively created and dominated by Chinese developers and equipment manufacturers, and these have started to make inroads into foreign markets. Rather than depending on foreign standards or inclusion in global supplier networks, Chinese actors are helping set global standards and take lead firm roles in developing supplier networks.

These findings suggest that global development patterns of innovative activity for the next generation of renewable energy technologies may see a decidedly different role for emerging economies. China in particular appears to have an environment suitable for early stage industrial path development, benefitting from a specific combination of policy-induced experimentation, bottom-up entrepreneurship, and risk acceptance levels by key investors that exceed Western standards (cf. Gosens et al., 2018; Tyfield, 2018; Tyfield et al., 2015). Discussions on the concept of the next phase of the global energy transition should arguably include attention to shifting geographical patterns in the development of next generation renewables technologies and their industries.