China is rapidly expanding its green energy production and growth potential and, in doing so, is quickly gaining influence in key emerging markets around the world. While China is busily making inroads in renewable energy markets in Southeast Asia, Africa, and even the West, nowhere has its sphere of influence grown more rapidly or completely than in Latin America.
China has been vastly outpacing the rest of the world in terms of clean energy spending, with more numerous and more developed clean energy supply chains than anywhere else on the planet. China alone was responsible for nearly half of all renewable energy spending worldwide in 2022, totalling a whopping $546 billion USD according to figures from a BloombergNEF analysis released early this year. This figure crushed the next-biggest spenders, the US and the EU: Beijing’s spending nearly quadrupled Washington’s $141 billion in clean energy spending, and was 2.5 times more than the EU’s $180 billion.
China’s intensive spending on the sector has paid off; the country’s clean energy sectors are now economically independent enough to be weaned off of heavy government support, and are now outcompeting every other clean energy leader on the global stage. “China has managed to nurture these really integrated, efficient value chains for making things like solar panels, for making things like battery cells,” Antoine Vagneur-Jones, head of trade and supply chains research at BloombergNEF, was recently quoted by Scientific American. Due to the massive head start that China has in these sectors – not to mention its near-complete control over many rare Earth metals markets – it’s more than likely that Beijing will continue to dominate for at least the next decade, if not longer.
This dynamic is especially pronounced in Latin America, where around 90% of all installed wind and solar technologies are produced by Chinese companies. As of 2023, Beijing has active free trade agreements with Chile, Costa Rica, Ecuador, and Peru (and is currently in negotiations with Uruguay), and so far 21 Latin American countries have signed on to China’s massive international infrastructure investing scheme, the Belt and Road Initiative (BRI).
China’s State Grid now controls the majority of Chile’s regulated energy distribution. Similar problems are unfolding in Peru. Earlier this year, a Peruvian industry group warned that a major deal in development for a Chinese company to buy out two local power suppliers “would hand the Asian country a near monopoly over the sector in Peru, particularly in and around populous capital Lima.” The deal, which is still awaiting regulatory approval, would just be the latest of a long series of Chinese acquisitions in Peru. "If approved, it would lead to a concentration of 100% of Lima's electricity distribution market in the hands of the People's Republic of China," the Peruvian National Society of Industries, a chamber of private companies, was quoted by Reuters.
Beijing is also rapidly ramping up its investments in Latin American minerals. The continent is rich in key materials in renewable energy and electric vehicle manufacturing such as lithium, nickel, and cobalt. China is already the “dominant producer of rare earths and graphite globally,” The South China Morning Post recently reported based on recent BloombergNEF data. “It also owns around a third of global rare earths, a sixth of graphite and an eighth of lithium reserves.” And expanding its acquisitions of Latin American minerals is a key part of China’s strategy. Chinese companies already own major stakes in one of the largest lithium producers in Chile, has purchased a ‘major evaporative lithium project’ in Argentina, and has signed dozens of trade-strengthening agreements with Brazil.
And China is not the only global power eyeing Latin American lithium. The United States, too, has a vested interest in forging trade agreements with the continent’s producers of rare Earth minerals. In fact, it’s a key part of the nation’s strategy to catch up with China and become competitive in renewable energy markets. However, countries in Latin America are increasingly talking about shying away from such agreements with the US and China in the interest of shoring up their own manufacturing industries and taking advantage of value-addition opportunities domestically.
By Haley Zaremba for Oilprice.com