How the U.S. Can Stop Losing the Race for Clean Energy

The United States is currently falling behind China in the race for clean energy technologies and critical minerals. To regain its competitive edge, the U.S. must implement a strong domestic industrial policy and foster international partnerships.

The Problem

The rise of clean energy presents immense economic and diplomatic opportunities for the U.S., but it also poses significant strategic challenges. Here are three key points to consider:

1. Economic Importance: Clean energy technologies are crucial for America’s economic future.
2. Intensifying Competition: The competition in clean energy is escalating, and the U.S. is losing ground in technological leadership.
3. Focused Strategy Needed: A targeted industrial strategy, bolstered by international alliances, is essential for the U.S. to compete effectively.

The Inevitable Rise of Clean Energy

Technologies such as solar, wind, and batteries are rapidly gaining traction as they become cost-competitive or even cheaper than traditional options. Their long-term advantages include:

• Efficiency: They generate electricity without combustion.
• Local Sourcing: They can harness energy from local environments, reducing dependency on complex fuel supply chains.

Despite the continued consumption of fossil fuels, clean energy is experiencing the highest growth, with global investment in clean energy nearly double that of fossil fuels. For instance, global battery storage installations nearly tripled in 2023 compared to the previous year. By 2025, new batteries capable of storing energy for days—rather than hours—are expected to be deployed.

Additional advancements are on the horizon, with the costs of next-generation geothermal power falling rapidly and nuclear energy experiencing a resurgence due to its ability to provide continuous power. Moreover, industries that are hard to decarbonize, such as cement and steel, are beginning to adopt clean technologies.

Electric vehicles (EVs) are among the most disruptive innovations, proving to be more energy-efficient and cheaper to maintain than internal combustion engines. Sales of internal combustion vehicles have declined significantly, with global EV charger installations quadrupling from 2020 to 2023. By the end of the decade, EVs are projected to become more affordable than their traditional counterparts.

Investment patterns clearly indicate a shift toward clean energy. Annual global investment in fossil fuels remains stagnant at around $1 trillion, while energy transition investments are growing at about 25% annually, surpassing $2 trillion in 2024. This growth is starting to permeate emerging and developing markets, with countries like Pakistan rapidly increasing their solar installations.

Implications for the U.S.

As the world’s largest producer, refiner, and exporter of oil and gas, the U.S. faces challenges in maintaining its position. The Trump administration aimed to remove restrictions on American hydrocarbon supplies, but experts warn that global crude oil demand is likely to plateau around 2030, impacting U.S. exports.

China’s transition to EVs is a significant factor, as gasoline consumption in China peaked in 2021 and has been declining. The trend is further amplified by the influx of Chinese EVs into emerging markets, which diminishes global fuel demand.

Even as oil and gas demand could persist, the scale of clean technology growth presents a vital opportunity that the U.S. must not overlook. If the U.S. wants to remain competitive, it must take clean energy technology and supply chains seriously.

Global Competition Intensifies

Since the U.S. passed the Inflation Reduction Act, other nations have ramped up their investments in clean technologies. Countries like Japan, South Korea, and members of the European Union have established robust industrial policies. Emerging economies such as India and Indonesia are also positioning themselves within clean energy supply chains.

The Gulf states are another noteworthy example. While they continue to invest in oil and gas, they are also diversifying their economies by investing in clean energy. For instance, Saudi Arabia and the UAE are accelerating investments in renewable energy and hydrogen projects.

The Race for Technological Leadership

The U.S. must recognize that its prosperity hinges on technological leadership. While the CHIPS and Science Act acknowledges this truth, merely reshoring existing technologies is not sufficient. The U.S. needs an innovation-first approach focusing on future products and processes.

Despite recent gains from the Inflation Reduction Act and Bipartisan Infrastructure Law, the U.S. still lags behind in critical areas like minerals and subcomponents. China aims to dominate the clean technology market and is strategically deploying resources to achieve this goal.

The Importance of Clean Energy Supply Chains

The U.S. must build clean energy supply chains abroad to achieve four key objectives:

1. Geopolitical Leverage: Investing in clean energy supply chains enhances U.S. diplomatic relationships and strengthens its position in global value chains.
2. National Security: Many clean energy technologies have military applications, and the U.S. must lead in these dual-use technologies.
3. Economic Growth: Clean energy investments create economic spillovers that benefit the broader economy.
4. Energy Autonomy: Developing clean energy technologies can help reduce reliance on foreign powers and secure long-term energy independence.

Strategic Recommendations

To achieve its goals, the U.S. needs a dual approach that combines domestic industrial policy with international cooperation. This involves:

• Onshoring: Bringing production home where economic strengths already exist.
• Friendshoring: Collaborating with trusted partner countries to secure critical minerals and technologies.
• Leapfrogging: Focusing on next-generation technologies to establish a competitive advantage in emerging markets.

Conclusion

The U.S. must focus on leapfrog opportunities while leveraging foreign policy to stimulate export markets and advance joint research and development. Congress should prioritize a comprehensive report on U.S. industrial policy and competitiveness, as well as create bipartisan consensus on long-term technological priorities. By broadening and focusing initiatives like the Partnership for Global Infrastructure and Investment, the U.S. can build robust clean energy supply chains that strengthen its geopolitical standing and economic future.