China looks ‘uniquely’ strong on AI energy, says HSBC CSO

China’s dominance in clean energy has put the country on a singularly strong footing when it comes to competing with the rest of the world — particularly the US — in building artificial intelligence.That’s according to Julian Wentzel, chief sustainability officer at HSBC Holdings, who says an economy built on renewable energy brings with it advantages that can’t be replicated by fossil fuels."China has put themselves in a very unique position in terms of the energy requirement to fuel their economy and ultimately their AI architecture,” Wentzel said in an interview.The vast build-out of clean energy in China — the country is on track to once again break its own record in installing renewable power this year — "enhances their cost of capital,” he said.Once renewable energy infrastructure is built and the upfront investment has been paid off, producing extra energy carries effectively no incremental cost; fossil fuels, in contrast, require ongoing costs for extraction, transport, refining and distribution, he said."Once you’ve got the architecture in place, as the demand grows, you can deliver that demand at zero cost,” Wentzel said. As the "percentage cost of every incremental kilojoule of power relative to total GDP declines over time,” it becomes "a very powerful lever to the underlying growth of an economy.”The comments stand in contrast to the policy position of the government in the US, where Energy Secretary Chris Wright has argued that a rapid transition to clean energy will raise energy costs and hurt economic growth. And for now, fossil fuels continue to provide a major share of the energy powering AI data centres.Microsoft Corp Chief Executive Officer Satya Nadella said recently the supply of power, rather than the availability of semiconductors, accounted for the biggest bottleneck in data centre capacity. And by some estimates, the energy needs of existing and planned AI infrastructure in the US can’t be met with current supply.That dynamic has created an opportunity for oil majors to cash in on the enormous demand for energy that will be needed to power data centres. Chevron Corp said on Wednesday it will provide natural gas-fired power to a data centre in West Texas, the beginning of a new line of business for the company to capitalise on the AI boom.The global race to dominate AI depends on an array of factors that includes chips and supply chains as well as rare earths and key metals such as copper. But energy supply is key, and because renewables are low-cost to run once infrastructure is built, countries that have greater access to them have an advantage, Wentzel said.China is challenging developments in the West not just due to its dominance in cheap renewable energy, but also due to its approach to building artificial intelligence. That became apparent earlier this year, when startup DeepSeek indicated the country is capable of producing AI at a much lower cost and greater energy efficiency than US rivals.China’s growing dominance is also shaping talks at the COP30 summit in Belem, Brazil, where California Governor Gavin Newsom took several opportunities to warn that the US risks losing out on numerous fronts.One of the great abdications of the climate fight is "the own goal of the president of the US who simply doesn’t understand how enthusiastic President Xi is that the Trump administration is nowhere at COP30,” Newsom said.The US and legacy automakers "better wake up to that,” Newsom said at a press conference. "This is about economic power.”China manufactures about 80% of the world’s solar panels, supplies some 60% of the planet’s wind turbines, 70% of its electric vehicles and 75% of batteries, all at a lower financial cost than the West.To be sure, though China is adding unprecedented amounts of wind and solar, it’s still investing heavily in fossil fuels. That includes coal, which is one of the reasons the country produces almost 30% of global emissions.Wentzel said economies that rely more on clean energy are also more likely to reduce volatility in inflation."Removing dependence on fuel commodities reduces capital account fluctuations, exposure to inflation and price swings,” he said. "As renewable systems scale, energy costs as a share of GDP can fall, strengthening the financial efficiency of the system and supporting higher economic growth.”