The Dragon’s Energy: A Decade of New Energy Dominance in China

As global climate change becomes an increasingly severe challenge and traditional fossil fuels are gradually depleted, the new energy industry has emerged as a crucial force driving the transformation of the global energy structure. The development and utilization of new energy have become focal points of attention for countries around the world.

Over the past decade, technological advances and cost reductions have enabled new energy to play an increasingly important role in the global energy supply. Additionally, government policies, growing market demand, and heightened public environmental awareness have significantly propelled the development of the new energy industry, which has experienced rapid growth from its inception.

In terms of financing transactions, the number of new energy industry financing events in the primary market has shown a fluctuating growth trend over the past ten years. This trend reflects the capital market’s sustained attention to and confidence in the new energy industry.

In recent years, with the global pursuit of a low-carbon economy and the maturation of new energy technologies, the growth in financing event numbers in the domestic new energy industry has been particularly significant. In 2023, there were 452 investment and financing events, setting a new historical high. As of March 20, 2024, there have been 84 financing events in the new energy industry, indicating its robust development.

Moreover, the scale of financing amounts in the primary market of the new energy industry has generally been increasing since 2014, reaching a peak in 2022 with a total financing amount of 157.088 billion yuan.

Looking back at the development of the new energy industry over the past decade or so, the national new energy vehicle subsidy policy launched in 2010 can be seen as the industry’s explosion point. However, at that time, the new energy industry did not receive widespread attention from investors. As the economic structure transformed and upgraded, new energy technologies matured, and subsidies were broadly promoted, the demand for new energy surged. Investors began to shift their focus to this field, paying attention to sub-sectors such as automobiles, photovoltaics, energy storage, and wind power.

However, policy incentives also have their exhaustion periods. Originally scheduled to end in 2020, the new energy vehicle subsidy policy showed signs of premature decline in 2018, affecting the primary market: in 2018, the domestic new energy industry experienced a “double decline” in both the number of investments and the amount of funding after years of continuous growth. After the outbreak of the pandemic, the new energy subsidies continued, albeit with a moderate decline.

In September 2020, China announced its “3060 dual-carbon” goal to the world at the United Nations Assembly. Domestically, the pursuit of “dual carbon” goals transformed into rigid economic targets at all government levels, driving a rapid top-down growth in demand for the new energy industry. Key areas such as new energy vehicles, lithium batteries, and photovoltaic products are in a state of supply shortage. The new energy industry’s “star startups” have emerged like bamboo shoots after a rain, creating an unprecedented industry boom.

As of January 1, 2023, the new energy vehicle subsidy policy officially ended. This has caused some subsidy-dependent companies within the industry to face difficulties or even be eliminated, marking a shift from policy-driven to market-oriented operations in the new energy industry. This “major reshuffle” has led to natural selection within the industry. Notably, the comprehensive end of subsidies did not lead to a reduction in financing events as seen in 2019; instead, financing has increased in other directions beyond new energy vehicles.

In 2023, the government introduced over 200 policies aimed at supporting and regulating the development of the new energy industry, mainly focused on key areas such as automobiles, photovoltaics, energy storage, and power batteries. These policies have provided clear confidence for investors.

After more than a decade of development, Chinese new energy brands have evolved from technology OEMs to overseas brands. The “new three items” mentioned in the 2023 government work report—electric vehicles, lithium batteries, and photovoltaic products—saw exports grow by nearly 30%. The Chinese new energy industry has become a significant force influencing the global new energy industry development.

Looking to the future, with the development of large AI models and the explosive demand for computing power, the demand for energy and electricity will also surge. As Open AI’s Altman has pointed out, the two important currencies of the future will be computing power and energy. The new energy industry still holds vast potential for development.

From the perspective of single financing events, the average single financing amount in the new energy industry from 2014 to 2016 was significantly lower than the average amount over the past decade. From 2017 to 2020, the average single financing amount in the new energy industry was generally higher than the average; from 2020 to 2022, the new energy track overall saw active investment, with the average single financing amount reaching a new high in 2021 at 367 million yuan.

The increase in the average single financing amount is mainly due to the influx of various capital sources, leading to the occurrence of industry mega-financing events—for example, in the past ten years, there have been six mega-financing events in the new energy field, all concentrated between 2020 and 2022. In October 2022 alone, GAC Aion received an A-round financing of 18.294 billion yuan, marking the highest single financing amount in the domestic new energy field to date; BeyonCa Binli received a strategic investment of 10 billion yuan. These mega-financing events have elevated the overall average financing level for the industry that year.

As policies and market dynamics continue to evolve, the sector remains a critical area for investment and innovation, particularly in the context of global efforts to achieve sustainability and reduce carbon emissions.