Revitalizing U.S. Clean Energy Strategy: Competing for Technological Leadership and Global Supply Chains

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

The United States is significantly trailing behind China in the competition for clean energy technologies and critical minerals. To catch up, it requires a strong domestic industrial policy and robust international partnerships.

The Issue at Hand

The shift towards clean energy presents vast economic and diplomatic prospects for the U.S., while also posing considerable strategic and geopolitical challenges. This paper emphasizes three key aspects: clean energy technologies are vital for America’s economic future, competition is intensifying, and the U.S. is losing ground in leading new technologies. A targeted industrial strategy enhanced by international alliances can help the U.S. regain its technological leadership.

The Inevitable Rise of Clean Energy

Solar, wind, and battery technologies are rapidly advancing, becoming cost-competitive or even cheaper than traditional options. Their long-term advantages include thermodynamic efficiency and the ability to harness local energy sources, thereby reducing reliance on complex fuel supply chains. As a result, countries dependent on fuel imports can mitigate their vulnerabilities.

Although global fossil fuel consumption is projected to persist, the fastest growth is occurring in clean energy, with annual global investments in this sector now nearly double those in fossil fuels. In 2023, global battery storage installations almost tripled compared to the previous year, and by 2025, new battery technologies capable of storing intermittent renewable energy for days are anticipated to be deployed.

The transition to clean energy is also reflected in the increasing affordability and deployment of next-generation geothermal power and a resurgence in nuclear energy, which can provide continuous power. Innovative technologies are being introduced to electrify industrial heat, and new cement and steel factories are emerging that do not rely on fossil fuels.

Electric vehicles (EVs) represent a particularly disruptive technology. They are more energy-efficient than internal combustion engines (ICE) and generally cheaper to maintain. Global ICE sales have fallen by 23% since their peak in 2017, largely due to the rapid rise of EVs, particularly in China. The number of global EV chargers has quadrupled from 2020 to 2023, with new quick-charging options becoming available. By 2030, EVs are expected to be more economical than ICE vehicles without subsidies.

Investment trends reveal a significant transition: while annual investments in fossil fuels stagnate at around $1 trillion, investments in energy transition technologies are growing at about 25%, surpassing $2 trillion in 2024. This trend is spreading to emerging markets, which are increasingly adopting clean energy solutions.

Implications for the U.S.

As the largest producer, refiner, and exporter of oil and gas, the U.S. is at a crossroads. The current administration has sought to eliminate restrictions on hydrocarbon production and roll back regulations that hinder domestic demand for ICE vehicles. However, many forecasts indicate that crude oil demand will peak around 2030, affecting U.S. exports and business opportunities abroad, particularly in light of China’s transition to EVs.

China’s gasoline consumption peaked in 2021 and has since declined, with EVs now accounting for a significant portion of light-duty vehicle sales. This trend is expected to continue, dampening oil demand not only in China but also in emerging markets where Chinese EVs are gaining traction. Furthermore, the U.S. liquefied natural gas (LNG) boom may be short-lived, as analysts predict that global LNG markets will become oversaturated, limiting demand for U.S. exports.

Even if demand for oil and gas remains higher than expected, the growth potential for clean technologies is too significant to overlook. Projections suggest that global investment in low-carbon energy systems could exceed $6 trillion by 2030, presenting a market opportunity that the U.S. cannot afford to miss.

Intensifying Global Competition

Since the U.S. enacted the Inflation Reduction Act (IRA), other nations have stepped up their investments in clean energy technologies. Japan, South Korea, and the European Union, along with China, have established industrial policies to support solar, wind, and battery production. Countries like Indonesia, Mexico, Brazil, and India are developing strategies to integrate into clean energy supply chains, with India investing heavily in domestic solar, battery, and hydrogen production.

Gulf states are also diversifying their economies by investing in clean energy, while continuing to capitalize on their existing oil and gas wealth. They are funding renewable energy projects and developing domestic manufacturing capabilities, pushing the boundaries of clean power applications.

The U.S. must recognize that investments in fossil fuels, if they come at the expense of clean energy initiatives, could jeopardize its strategic position in the global market.

The U.S. Must Act

To remain competitive, the U.S. needs a bipartisan industrial policy that supports clean energy technologies and supply chains. This strategy should prioritize reducing overreliance on any single foreign nation and focus on leapfrog opportunities in emerging technologies.

Building clean energy supply chains abroad is crucial for several reasons:

1. Geopolitical Leverage: U.S. global leadership depends on proactive international diplomacy. By investing in clean energy supply chains, the U.S. can foster positive relationships with developing nations while providing them with essential technologies.

2. National Security: Many clean energy technologies, such as lithium-ion batteries, have military applications, and the U.S. must ensure it leads in these areas to secure its defense capabilities.

3. Economic Growth: Investments in clean energy will create economic benefits across sectors, helping the U.S. maintain its position as a leader in technology and energy.

4. Energy Autonomy: Developing clean energy technologies will minimize reliance on foreign powers and support long-term energy independence.

Conclusion

To achieve success, the U.S. must integrate domestic industrial policy with international collaboration to build resilient supply chains and advance cutting-edge technologies. This involves targeted investments, creating strategic partnerships, and fostering innovation in clean energy sectors. A coordinated approach will help the U.S. regain its competitive edge in the global clean energy race.