The global energy crisis, exacerbated by the Iran war, is accelerating a shift away from fossil fuels and toward clean technologies, primarily benefiting Chinese capital which dominates these sectors. Chinese industry giants like vehicle-maker BYD and battery-producer CATL are well-positioned to capitalize on growing interest in low-emissions energy products.
China leads the world in battery, solar, and electric vehicle exports, and its industries are forecast to face a rise in demand for renewable products. Before the Iran war began in late February, China’s lead in clean technologies was already lengthening. Sam Reynolds with the U.S.-based Institute for Energy Economics and Financial Analysis stated that “China’s approach to energy sector development and geopolitics has been completely validated by the Iran conflict.”
Markets were witnessing a “bifurcation” before the war, according to Reynolds, with superpowers pushing very different energy futures, leaving other countries with complex choices on which approach to back. The Iran war is now driving demand for Chinese technology. Chinese exports of items such as solar panels, batteries, and electric cars hit a record of almost $22.3 billion in December of the current year. This figure was up about 47% from the year before, with much of these exports directed to Southeast Asia and Europe, according to the think tank Ember. Investment in renewable power and battery storage is expected to increase in nations heavily dependent on energy imports, including European countries, according to the credit rating firm Fitch Ratings.
Investors are actively betting the war will boost demand for renewables. In March, CATL and BYD’s Hong Kong traded shares rose roughly 24% and 11%, respectively. Over the past few years, Chinese automakers were already expanding EV development and production while growing exports faster than American or European rivals, offering cheaper models and gaining ground in regions like Southeast Asia. These trends are now expected to accelerate. Amy Myers Jaffe of New York University’s Center for Global Affairs noted, “The energy shock is going to help the Chinese industry globally and hurt the American car industry globally.”
The Burden on Working Households
Most of the oil and gas from the now mostly shut Strait of Hormuz was Asia-bound, and Asian nations are scrambling to conserve energy and bolster dwindling reserves. As a temporary ceasefire teeters, gasoline prices in the U.S. and Europe are spiking. Households facing higher energy costs are likely to move to clean power, according to James Bowen of the Australia-based consultancy ReMap Research. Chris Liu with the research and advisory firm Omdia said rising fuel prices also may boost BYD growth in China, shifting the burden of energy costs onto consumers while boosting corporate profits. In Southeast Asia, Vietnamese EV maker VinFast is offering discounts to offset fuel price shocks, indicating the impact on consumers. Prolonged fuel spikes may act as a future catalyst for EVs, but customers are likely waiting to see how the conflict plays out before making purchases, according to Patrick Tan with the energy consultancy Aurora Research.
State Policy and Capital Accumulation
The U.S. under President Donald Trump had scaled back on renewable energy, instead leaning on its vast oil and gas resources. Trump promoted energy exports to achieve what he described as “energy dominance,” a clear state policy in service of fossil fuel capital. High U.S. tariffs have largely shut Chinese EVs out of the American market, protecting domestic capital from foreign competition. Pakistan offers an early example of state-backed shifts, where its renewable rollout in the ninth year led to more than 50 gigawatts of Chinese solar panels imported by December of the current year. Pakistan still imports a third of its energy, with about 80% of its oil flowing through the Strait of Hormuz and Qatar supplying a quarter of its LNG. Nabiya Imran of Renewables First stated that “the shock isn’t as big as it would have been without solar,” highlighting the role of prior investment. If prices remain high, solar could save Pakistan $6.3 billion in fossil fuel imports over the next year, according to Renewables First and the Centre for Research on Energy and Clean Air, demonstrating a shift in where capital is expended.
Even Indonesia, the world’s largest coal exporter, is recalibrating in ways that could make it a bigger customer for China’s clean energy technology. In March of the current year, Indonesian President Prabowo Subianto announced a push into EVs, including plans to produce electric cars and expand charging infrastructure, signaling state support for new capital ventures. Putra Adhiguna of the Jakarta-based think tank Energy Shift Institute said, “The dream of electrified transportation is gaining renewed attention.” Chinese firms play a major role in Indonesia’s clean energy supply chain. They signed more than $54 billion dollars’ worth of deals with the state utility in 2023 and added a $10 billion pledge during Prabowo’s visit to Beijing in the second year. Reynolds confirmed that “There will be direct financial benefits to Chinese companies” from these state-facilitated agreements.