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Reassessing the Chinese Clean-Tech Juggernaut (or Why the U.S. Shouldn't be Written off Quite Yet)

China is clearly a clean-tech force to be reckoned with. It installed more wind power, manufactured more solar PV and solar hot water heaters, and spent more money overall on clean-energy investments than any other nation in 2010. The Chinese government, facing severe pollution issues and energy shortages, has made clean tech a cornerstone of its economic security and development plans.

In the nation’s latest Five-Year Plan, the Chinese are calling for at least 11 percent of energy to come from non-fossil fuels by 2015. At least 70 GW of new wind capacity, 5 GW of new solar capacity, and a $76.7 billion commitment to build new transmission lines to move renewable energy around the country are just a few of the nation’s current targets and efforts. 

But while China is clearly playing a leading role in clean-tech development and deployment, here are four reasons why I wouldn’t brand China the de facto clean-tech winner and count the U.S. out of the global clean-tech leadership running just yet:

1. U.S. innovation and marketing might matters.  It took me a while to finally get an iPad, but what an eye-opener when I finally did (it’s an iPad 2). Steve Jobs’ imprint is all over the thing. It’s seamless to operate, it’s a joy to hold, it’s, I hate to say this without sounding clichéd, a work of technological prowess and art.  

And while the clean-tech industry isn’t high tech, it brings a smile to my face that this product could most likely only have been created in the U.S. Of course, America doesn’t have the market cornered on design and innovation, and the verdict is still out on what type of green-tech blockbuster might be developed here. But as Fortune writer and green business blogger Marc Gunther recently asked at a conference I attended: “Can you name one consumer technology brand that’s a household name that originated in China?” Bet that one has you stumped too. Which is why, although my iPad is manufactured in China, it was clearly designed in and marketed from Cupertino, California, and symbolizes the U.S.’s competitive edge. 

2. On a per capita basis, the U.S. still leads.  Sure, all of these reports on China’s clean-energy dominance are scary. But most of them don’t levelize the data. China is huge, and as it grows, of course it’s going to be a behemoth. But that doesn’t mean it’s leading in all the indicators.

Take clean-energy investments as an example. The respected Pew Charitable Trusts and Bloomberg New Energy Finance recently released the 2010 edition of “Who’s Winning the Clean Energy Race?” According to the report, in 2010 China led all nations with $54.4 billion in private clean-energy investment, outpacing the $34 billion in total investment in the U.S. But if you look at the data on a per capita basis, the U.S. is investing $110 per man, woman, and child whereas China is investing $41 per person. The U.S. shouldn’t rest on its laurels and I believe it needs to increase its overall investment in clean-tech R&D and deployment, but it’s important to put these things in perspective.

3. China’s role on the global stage will increase, and so will expectations. In the context of a range of different intergovernmental organizations – such as the WTO, UN, World Bank, and IMF – China is defined as a developing nation. And with good reason: according to the UN, China still has 150 million people living in extreme poverty (on less than one dollar per day) and on a per capita basis, the IMF estimates Chinese GDP to be more than six times below that of the U.S.

But as China continues to rapidly grow and increases its economic leadership, it will inevitably be expected to accept more of a peer-to-peer role internationally. Standoffs such as those with the UN Framework Convention on Climate Change and labor disputes such as those with the WTO are becoming less tolerable with the international community, as Japan, the U.S., and Europe look to level the playing field. Most important, China will eventually need to let its currency float or increase more in value on the international market, which will dramatically reshuffle the economic landscape and expectations.

4. China is moving (too) fast. Most of us, especially in the business world, consider fast good. But, as any builder or other project developer knows, that’s not always the case. Moving too fast in deploying technologies and products, and building out infrastructure, can cause serious and unforeseen problems.

In China, this can be seen in fast-tracked high-speed rail plans that are now being scrutinized because of corruption and potential cost-cutting and public safety issues. In February, according to news sources, the program’s minister was accused of accepting bribes amounting to $152 million and in March auditors reported $28 million had been embezzled in the Beijing-Shanghai line alone, raising questions about whether corners had been cut. It can also be seen in tainted Chinese products, like milk and toys, which have contained highly toxic pollutants. If not put in check, China’s breakneck pace of growth and greed may scare off future customers if it sacrifices quality, integrity, and public safety.

US Needs Long-term Energy Planning Without Politics

Don’t get me wrong. I’m in no way discounting the Chinese. I just think it’s important that we don’t get so caught up in the hyperbole and fear-mongering that we lose perspective. In many ways the U.S. is certainly at a disadvantage when it comes to competing with Chinese manufacturing firms. As noted above, the playing field just isn’t level right now.

I was talking recently with the former CEO of a PV manufacturing firm. He was emphatic in his concerns for domestic manufacturing, and basically asked how do you compete against the Chinese when the government there is handing out free land and practically free money? And how does the U.S. compete against national programs in China that are committed to making sure the Chinese are clean-energy leaders, with ever-increasing commitments in their five-year planning cycles, when the U.S. can’t pass its own national plan or strategy?

John Hofmeister, former president of Shell Oil and author of “Why We Hate the Oil Companies,” has called for the creation of an independent regulatory agency, entitled the Federal Energy Resources Board (FERB), to guide the country’s energy policy. FERB, similar to how the Federal Reserve Bank oversees monetary policy, would guide the country in its energy policies via a presidentially appointed and congressionally mandated board of governors and regional boards.

It would, according to Hofmeister, help remove politics from the energy planning process, remove paralysis from the equation, and provide the U.S. with something akin to China’s mid- and long-term planning.

I think Hofmeister is right. While John and I might not agree on the exact methods, models, or targets, I wholeheartedly agree that we need a planning process that ensures that businesses, investors, and government are on the same page and building toward common clean-energy and environmental goals. The devil is in the details, of course. But if we wish to compete and succeed in an increasingly competitive global market, it is critical that we create an environment where long-term planning can thrive – and where American innovations, like Apple’s iPad tablet and the clean-tech breakthroughs of the future – can flourish.

[Editor’s note: To hear an interview with John Hofmeister, listen to Stephen Lacey’s Podcast, “Can We Get an Energy Plan, Please” at this link.]

Ron Pernick is cofounder and managing director of Clean Edge and coauthor of The Clean Tech Revolution.

 

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