Russia's invasion of Ukraine is creating an opening for the renewable energy industry to grab market share as countries look to cut their dependence on fossil fuels, but the shift may do little to boost energy security without strategic investments in green energy supply chains.

China has significant influence over those networks for manufacturing and raw materials, raising the prospect that the energy transition may swap one source of geopolitical and supply risk for another.

Doubling down on clean energy to diversify from Russian oil and gas is "hollow if it's not accompanied by a tangible commitment to those underlying supply chains," Reed Blakemore, deputy director of the Atlantic Council's Global Energy Center, said in an interview. "The West needs to start taking these upstream supply chain issues much more seriously than it has thus far."

More than 80% of the world's solar cell- and module-making capacity is in China or is controlled by Chinese companies in Southeast Asia, according to Paula Mints, chief analyst at SPV Market Research. As of 2021, China also accounted for 79% of cell production for lithium-ion batteries, according to Benchmark Mineral Intelligence.

Further, China holds a pivotal position in the market for energy transition minerals. The country processes about 35% of the world's nickel, 39% of its copper, between 50% and 70% of its lithium and cobalt, and nearly 90% of rare earth elements, according to the International Energy Agency and the Biden administration.

Compounding concerns about China's dominance, analysts have already warned of looming shortages of minerals needed to meet current clean energy targets. China has set ambitious domestic renewable energy goals. If raw material were in short supply, Beijing likely could prioritize limited resources for its own needs, Blakemore said.

Liu Pengyu, a spokesperson for the Chinese Embassy in Washington, said in an emailed statement that the country "has always provided support and guarantee for the safe and stable operation of global industrial and supply chains."

"Artificial industrial 'transfer,' 'decoupling' and altering economic laws with political forces is an unrealistic approach that can neither solve domestic problems nor do anything good to global industrial and supply chains," Liu added.

European Commission Executive Vice President Frans Timmermans has acknowledged the challenge that raw material supplies pose to the bloc's energy strategy and that Europe will need to invest "massively" to reduce its dependence on outside countries.

The European Commission released a plan March 8 to deploy more renewables to help wean the bloc off Russian energy. "All of that is on the way," Timmermans said at a news conference, pointing to an existing program to create a European battery industry and plans to boost recycling.

Amos Hochstein, the U.S. State Department's energy envoy, has also said the West should accelerate adopting cleaner forms of energy in response to Russia's invasion of Ukraine.

Politics vs. economics

For the past decade, the U.S. has used import tariffs to try to weaken China's grip on solar supply chains and to boost domestic cell and module manufacturing, to little effect.

"Politically, it all makes sense" to develop more American solar manufacturing, Ethan Zindler, head of Americas at BloombergNEF, said in an interview. "But economically, manufacturers have found it difficult to justify opening plants in the U.S."

Some solar companies are already moving to create non-China supply chains after the U.S. started detaining imports suspected of being made with forced labor. President Joe Biden signed a law late in 2021 barring imports linked to China's Xinjiang region unless importers can prove that goods were not made with forced labor. EU lawmakers are pursuing a similar measure.

The Chinese Embassy in Washington said allegations of forced labor are lies. "The U.S. acts totally violate market principles and commercial ethics," said Liu, the embassy spokesperson.

It is not clear how much of that new manufacturing capacity will be created outside of Southeast Asia. Incentives to encourage more U.S. production are stalled in Congress.

Analysts and advocates expect that at least some new factories will be built in the U.S., even without incentives.

"If you want to serve this market now, and you've lived through the Trump years, and you see that Biden hasn't exactly gone easy on China either, then it's a smart move to put some manufacturing over here to serve the market," Zindler said.

With the crisis in Ukraine, lawmakers will likely feel more pressure now to onshore green energy supply chains, Robert Johnston, an adjunct senior research scholar at Columbia University's Center for Global Energy Policy, said in an interview.

"Canada and the U.S., whether it's batteries or solar or hydrogen or advanced biofuels, we definitely have the know-how. The challenge was the commercialization and producing these innovations at scale," Johnston said. Johnston is executive vice president of strategy and stakeholder relations at Ubiquity Solar, which is trying to create a full solar supply chain, from polysilicon to panels, in North America.

'I guess we're status quo'

The Biden administration has been pushing to increase domestic minerals production and processing, but there is deep frustration at what is seen as a lack of progress. In January, the U.S. Interior Department effectively blocked development of a $1.7 billion copper-nickel project in Minnesota on the grounds that the leases, which were held by Antofagasta PLC's Twin Metals Minnesota LLC, were improperly renewed.

"All it means is, OK, I guess we're status quo and we're going to rely on China," Chris Berry, president of the consulting firm House Mountain Partners LLC, said in an interview in late February. "And who knows, maybe the Europeans can get it done. But I don't know if it's any easier to build mines over there."

Serbia revoked permits for a Rio Tinto Group lithium project at the start of the year, dealing a blow to European battery-makers and electric vehicle manufacturers.

On March 8, Sen. Ron Wyden, D-Ore., introduced legislation that would provide $50 million in grant funding for processing critical minerals in the U.S. "Expanding domestic manufacturing of these technologies is vital as the U.S. makes the transition to energy independence and a clean energy future," Wyden's office said in a statement, adding that the country currently imports the majority of its critical minerals from Russia and China.

Meanwhile, China has been snapping up assets in a bid to further its control over mineral supply chains.

"There is a reality that China has used its dominance in these supply chains for geopolitical gain in the past," said Blakemore of the Atlantic Council, noting that China reportedly blocked shipments of rare earth minerals to Japan in 2010 during a maritime dispute.

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