ASIAN NATIONS IN POWERFUL NEW ENERGY ALLIANCE

Asia Challenges the U.S. for Green Tech Supremacy
Cesar Bacani, June 24, 2009 (Time Magazine)

SUMMARY
Japan, China and South Korea will meet in August to plan for joint efforts in New Energy. The innovative potential is more than big. It is intimidating.

As President Obama has frequently said, the nation that leads in New Energy will lead in the 21st century. The Asian collaboration surely threatens the rest of the world for New Energy leadership.

Japan is probably the world leader in hybrid car technology and China is emerging. By collaborating, it is not hard to imagine they could build a Battery Electric Vehicle (BEV) industry that would make 20th century Detroit seem like a small down general store in comparison to a supermarket chain.

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It is a "dream team" of almost imponderable potential: China’s enormous market, low-cost manufacturing base and vast ready capital reserves combined with the South Korean and Japanese black belt-level skills in engineering and management.

The South Korean government has earmarked $31 billion for R&D in 27 New Energy and Energy Efficiency technologies such as non-silicon solar cells, biomass fuels, and carbon capture and sequestration (CCS). A full 81% of its stimulus package is aimed at New Energy.

38% of China’s $587 billion stimulus package is aimed at developing its already booming New Energy and Energy Efficiency industries.

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The Japanese government recently announced a resumption of the solar energy subsidies that made its installed solar capacity the biggest in the world until the middle of this decade when Germany’s policies were ratcheted up and Japan’s were eased off.

Unlike the European Union (EU) meeting-of-the-minds, this Asian trilateral coalition is not driven as much by a concern with global climate change and the economic opportunities in greenhouse gas emissions (GhGs) reduction as it is by the intention of seizing and owning the huge economic opportunity of New Energy and Energy Efficiency technologies.

The EU agreed this year to a “triple 20” goal. With unanimity of purpose, the EU agreed this year to aim at getting 20% of their power from New Energy sources, cutting their GhGs 20% and becoming 20% more efficient by 2020.

Asia owns the lithium-ion battery. (click to enlarge)

A trilateral agreement will allow the 3 Asian nations a unified stance and, if necessary, leverage against the EU’s “triple 20” at the Copenhagen Climate Conference in December, where the nations of the world hope to hammer out an international agreement to replace the Kyoto accords on emissions reductions.

This agreement alone is probably not enough to set off a trade war between the East and the West but it intimates the possibility. Can Asia take over? It is behind in emissions trading, which means it has no common market through which to work. And Japan and South Korea will likely have concerns about the protection of their innovations because China is known to not be reliable with intellectual property rights.

The good news: Competition stimulates innovation. These 3 Asian tigers can surely give the U.S. and Europe a run for the money. Let the games begin.

GM chose a South Korea-based company to make the battery for its breakthrough plug-in Volt. (click to enlarge)

COMMENTARY
Whether the trilateral Asian partnership is aimed at climate change or economic dominance, the end is the same: A powerhouse in the New Energy economy is about to be born.

It is no accident that these 3 nations have little in the way of Old Energy resources (except China’s coal). This is yet another reminder that the era of fossil fuels is coming to an end as a result of the limitations of fossil fuels themselves.

Oil was once a cheap source of transportation and heating energy but the easy-to-get at oil is running out. What is left is under arctic ice caps, deep in the oceans, held in dangerous, conflict-torn regions or in hard-to-refine sand and shale deposits. It is already expensive for importers like China, Japan and South Korea, and will grow moreso.

Japan was, until the last few years, the world leader in PV solar. (click to enlarge)

Coal is still cheap – unless its toxic effects are priced. And China’s ecessive dependence on coal has made the dreadful health harms of mining and burning it unavoidably evident.

One reason Japan and South Korea have been so successful at innovation is that they are not rich in these resources. Exemplary is South Korea’s new national vision of "low carbon green growth" and its commitment to spend $40 billion over the next 4 years to transition its industrial base to New Energy. Also exemplary is Japan’s July 29, 2008, “action plan to create a low-carbon economy” that formulated a “new direction of policies on new and renewable energy” and set targets of 14-gigawatts of installed solar energy capacity by 2020 and 50-gigawatts by 2030.

Japan is ready to get back in the game. (click to enlarge)

Compare this to nations like Saudi Arabia and Iran, which have been slow to develop their resourcefulness because they have the one natural resource of oil. The horror the U.S. must contemplate is this: Will it continue to chant “drill, baby, drill” and let its coal industry dictate energy policy and let its nuclear industry use up all the federal funds left over and let itself slowly turn into a backward economy? Or will it find the courage to be like these 3 visionary Asian nations and turn toward the future?

The biggest obstacle for the U.S. in making a transition to a New Energy economy at this moment, despite the urgency of climate change and the obviously dwindling value of dependence on Old Energy, is the sad state of the budget. Courageously, the Obama administration chose to invest a big chunk (12%) of its $787 billion stimulus package in New Energy. But with the U.S. debt at 82% of GDP and the deficit headed toward $1.4 trillion, the U.S. will be hard-pressed to continue competing with an effective Asian alliance.

It is true that the U.S. was not the first to put a satellite into orbit yet won the space race. But that was then. Now the U.S. could be pulled down by the same things that defeated the Soviets in the space race, an economy inadequate to the challenges it faces and a prosperous alliance competing against it.

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Here’s a thought: Asia Pacific Economic Cooperation (APEC). Why doesn’t somebody in the Obama administration do some diplomatic groundwork through APEC for the opening up of the trilateral agreement to all the nations of the Pacific rim? They call it GLOBAL climate change for a reason.

Footnote: These 3 Asian nations have more-than-adequate intellectual talent to develop nuclear energy yet they are moving toward New Energy instead. There are only 2 explanations and it is probably not an either/or matter of why they are doing so: (1) Nuclear energy has too many unsolved problems, such as what to do with the waste, how to prevent the environmental harms of radioactive leakages, how to manage plants that do not slow down and speed up but require a ceaseless supply of relatively rare uranium and a constant consumption of ever more precious water; and (2) solving these problems makes building nuclear plants too expensive.

China wants to raise its grade. (click thru for the full report on China)

QUOTES
- Time Magazine: “It's really a hard-headed, shrewd initiative to marry Japanese and Korean high technology with China's manufacturing prowess, massive domestic market and bulging foreign currency reserves - thus creating a formidable player in a post-crisis, low-carbon world.”
- South Korean Prime Minister Han Seung-Soo: "[South Korean industry will transition to]…low carbon green growth…[and be] a new paradigm of qualitative growth which uses less energy and is more compatible with environmental sustainability…"

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- Time Magazine: “East Asia's bid for economic leadership in the low-carbon age may push the Americans - and certainly the Europeans - to intensify their engagement with green technologies. The space race spawned a lot of the advances in technology that we take for granted today. The green wars may do the same thing for low-carbon products and processes. If so, it's a conflict the world must be willing to fight.”