The Iran war has the world buying more clean energy. China stands to benefit the most

(CNN) — The war in Iran has sent oil-starved countries scrambling for fuel. Many are opting for energy alternatives — and turning to the renewables king of the planet: China.

Chinese exports of solar technology, batteries and electric vehicles all reached record highs in March, according to energy think tank Ember, a sign that the historic oil supply shock is accelerating the adoption of clean energy around the world.

After the US and Israel launched airstrikes against Iran in late February, the Iranian military effectively barricaded the Strait of Hormuz, cutting off about one-fifth of global oil and natural gas supply. Oil price volatility has surged as the conflict has expanded into the Middle East and negotiations to end the war have stalled.

Meanwhile, Asian nations that depend on the Middle East for energy imports are trying to mitigate fuel shortages by encouraging energy conservation and shortening work hours. As countries invest more in renewable energy, China stands to benefit as the world’s largest manufacturer of electric vehicles, wind turbines and solar panels.

A Thursday report from Ember said China exported 68 gigawatts of solar technology in March, surpassing the previous record set in August by 50%. Fifty countries set new records for Chinese solar imports, with the most significant growth coming from emerging markets in Asia and Africa hit hardest by the energy crisis, according to the think tank.

“Fossil shocks are boosting the solar surge,” said Euan Graham, senior analyst at Ember, in the report. “Solar has already become the engine of the global economy, and now the current fossil fuel price shocks are taking it up a gear.”

Ember said exports of solar, batteries and EVs in total rose 70% in March year over year, according to Chinese customs data. Those categories have become known in China as the “new three,” contributing significantly to the country’s GDP in place of clothing, home appliances and furniture exports that previously drove growth.

China’s battery exports reached $10 billion in March, with particularly high growth rates in the European Union, Australia and India, Ember said.

Paradigm shifts

Uncertainty over when the Strait of Hormuz will reopen has spurred deeper regional anxieties about energy security, helping to hasten the transition to clean energy, analysts said.

The US and Iran have agreed to a ceasefire while they negotiate terms to end the war, but tensions in the strait have remained elevated. Both US and Iranian forces have seized ships in the critical passageway, subduing further attempts to transit through.

The oil crisis has also reshuffled regional trade and relationships as nations seek to insulate themselves from the supply shock. Building out renewable capacity has been one way to cushion the blow.

“As we face the second fossil fuel shock in less than 5 years, the lesson for our country is clear: The era of fossil fuel security is over, and the era of clean energy security must come of age,” said UK Energy Secretary Ed Miliband, in a statement this week on the need to reduce the nation’s reliance on gas for electricity.

In China, massive state investment in green energy industries has bolstered its energy self-sufficiency, reducing its exposure to the oil shortage. Its dominance in renewable technology has also granted the country more geopolitical and economic influence as it exports its technology.

Pakistan has been spared some of the impact from the war, since it began drastically importing cheap Chinese solar panels a few years ago. Using solar energy rather than costly oil imports is estimated to save the country billions of dollars each year.

“China has been regarded as a low-cost supplier, but is increasingly treated as a long-term partner in the energy transition,” wrote Jeong Won Kim, a senior research fellow at the Energy Studies Institute at the National University of Singapore.

And it’s not just solar panels. Ember analysts estimated that global EV adoption had reduced oil consumption by about 1.7 million barrels last year — and as oil prices rose at the start of the Middle East conflict, Chinese state media reported that the country’s EV giants had seen an overseas sales surge.

According to the China Passenger Car Association, Chinese exports of electric vehicles and hybrids hit a record high in March, increasing 140% compared with the same period a year ago.

Analysts said part of the surge in solar sales last month was due to stockpiling before China discontinued a tax rebate in April. Lauri Myllyvirta, co-founder of the Centre for Research on Energy and Clean Air, said it’s unlikely the significant increase in exports from March will be sustainable.

Still, the conflict in the Middle East has strengthened the long-term case for alternative energy, he added.

“The fall in the costs of solar power and batteries, and now the higher and more volatile fossil fuel prices have made solar a no-brainer for a large share of global electricity consumers,” he said.

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