THE NEW ENERGY OLYMPICS

Will U.S. Companies Be Shut Out of Clean-Tech Markets by China and Other Competitors?
Lisa Friedman, March 4, 2010 (NY Times)
and
Out of the Running? How Germany, Spain, and China Are Seizing the Energy Opportunity and Why the United States Risks Getting Left Behind
Kate Gordon, Julian L. Wong, and JT McLain, March 2010 (Center for American Progress)

THE POINT
Astonishingly, there is a proposal in the U.S. Senate to withdraw the financial incentives provided to New Energy by the 2009 stimulus bill, potentially threatening tens of thousands of high-quality domestic jobs.

Beyond the short-term ramifications, however, the proposal is even more detrimental: It could further threaten U.S. economic competitiveness for generations. If the U.S. does not get competitive in the international race to develop a New Energy economy expected to be worth $2.3 trillion by the end of the next decade, it will have missed out on the biggest foreseeable opportunity in this century.

In Out of the Running? How Germany, Spain, and China Are Seizing the Energy Opportunity and Why the United States Risks Getting Left Behind, authors from the Center for American Progress (CAP) describe the federal government's to date support of the New Energy/Energy efficiency sector as “lollygagging.” They attribute this performance to inadequate and inconsistent federal policies that represent, in sum, a failure of real commitment to the sector. And they explain what a blow to the nation's international competitiveness it will be if effective policies do not emerge.

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This is not exactly news. Rising Tigers Sleeping Giant, a Breakthrough Institute 2009 report, showed that U.S. New Energy R&D spending is embarrassing in comparison to that of important Asian economies. (See ASIA, THE U.S. AND THE NEW ENERGY RACE) Investing in Climate Change 2010, a Deutsche Bank 2010 study, showed that investments in the New Energy economy pay better than the economy as a whole but require favorable policies and incentives to put them on a level playing field against the entrenched Old Energies. (See THE BEST BETS ARE ON THINGS THAT BEAT CLIMATE CHANGE)

The CAP study details how Germany, Spain and China are using public policy to make a real commitment and facilitate the building of a New Energy (NE) and Energy Efficiency (EE) infrastructure. Policies and programs signal their business communities and support their marketplaces as the transition to an emissions-free New Energy economy that depends on secure domestic energy resources and provides new jobs and a renewed manufacturing base for their populations moves ahead dynamically.

Apparently some members of the U.S. Senate find such things objectionable. But there are also Senators with more foresight now attempting to write energy and climate legislation that can win bipartisan support. Which element of U.S. political leadership prevails could determine the economic fate of the nation for decades.

The question is not whether the U.S. can afford to commit to New Energy and Energy Efficiency, the question is whether it can afford not to: Evergreen Solar built a plant to manufacture solar photovoltaic panels in Devens, Massachusetts, but, 2 years later, in the wake of failing support from public policy, moved part of the operations to Wuhan, China. Will this continue to be the pattern for U.S. manufacturing and the fate of the U.S. worker?

The problem is that with innovation, you get what you pay for. (click to enlarge)

THE DETAILS
The sad part of the Senators’ current call to dial back support for New Energy and Energy Efficiency is that they are relying on a single inaccurate study from Spain (see WIND GENERATES U.S. JOBS, REVENUES) and overlooking a mountain of evidence to the contrary. (For starters, see NEW ENERGY MANUFACTURING CAN MAKE THE MIDWEST ONCE AGAIN MIGHTY, THE STANDARD FOR NEW ENERGY JOBS, NEW ENERGY JOBS FOR THE STATE OF THE UNION…, …HOW NEW ENERGY CAN MAKE THE RUST BELT SHINE, CAP&TRADE IS GOOD FOR THE FARMERS…, NEW ENERGY WILL BRING BLUE COLLAR JOBS BACK…, NEW ENERGY EVERYWHERE, CLIMATE FIGHT IS…GOOD FOR THE BOTTOM LINE and LATEST NEW ENERGY JOB TRENDS…. And that's just for starters.)

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In New Energy economy product sales, the U.S. can claim second place in the most recent statistics – until sales are computed as a ratio to gross domestic product (GDP). In terms that express sales in proportion to the size of the economy, the U.S. ranks 19th, China is 6th, Spain is 4th and Germany is 3rd. The installed New Energy (NE) capacity standing of the U.S. falls comparably when it is measured on a per-capita basis.

The array of benefits that come from a transition to NE and EE begin with innovation. A 2009 CERNA study showed that developed countries committed to fight climate change through the Kyoto Protocol’s program for the building of an international New Energy economy increased their NE/EE patents by a third while the developed nations that avoided a commitment to the Kyoto process (especially the U.S. and Australia) did not significantly increase NE/EE innovation or patents.

Because they are not ranked as developed nations, China and India were not required to innovate in the same way yet both are now deeply immersed in the process of growing a New Energy economy. As the result of New Energy (and especially wind power) technology transfers, China’s participation in the United Nations (UN) Clean Development Mechanism (CDM), an important part of the Kyoto process, led it to the development of a NE/EE sector now on the verge of taking over world leadership.

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Innovation precedes startups, jobs and, eventually, revenues to communities and the nation. Without innovation, there is only a financial service industry and wealth for the Wall Street investors who trade in foreign companies’ stocks and derivatives and mysterious securitizations that package and repackage cascading U.S. real estate.

CAP’s The Clean-Energy Investment Agenda called for long-term federal polices that support (1) expanded NE/EE markets and demand, (2) investment in the full spectrum of the NE/EE value chain (R&D, commercialization, production, and deployment), and (3) investment to revitalize the physical and human infrastructure on which the innovations must depend, as all economic and industrial revolutions have depended, for successful implementation.

While Congress has compromised on the dimension and term of its commitment to NE and EE, China (an authoritarian developing economy), Germany (a long-established industrialized democracy) and Spain (a newly industrialized democracy) have each found policies that enact CAP’s advice – and have taken dominance in energy, the sector most likely to determine economic success in this century (as it has in every century).

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Denmark, Japan, South Korea and other developed and emerging economies are following the examples of China, Spain and Germany, even as a minority of short-sighted Senators call for doing exactly the opposite. Every year that the U.S. postpones action, it falls farther behind.

The competition between nations for NE/EE leadership has often morphed into fruitful bilateral and multilateral cooperation. The U.S. Department of Energy Lawrence Berkeley National Laboratory was instrumental in helping China develop efficiency programs. (See WHAT CHINA BRINGS TO THE TABLE) Both German and Spanish New Energy companies have investments in U.S. projects. U.S. companies, especially solar manufacturers, have enjoyed the fruits of German and Spanish subsidies.

A Roadmap for U.S.-China Cooperation, from CAP and the Asia Society, showed a cooperative effort to develop and implement carbon capture and storage technology (also known as CCS, or “clean” coal) could speed deployment by 10 years, create 940,000 new U.S. jobs by 2022 and save $18 billion. But that just suggests the potential NE/EE innovation, which the U.S. is largely failing to properly support, holds.

German policies drove solar growth to world-leading levles. (click to enlarge)

The 2 most important policies needed in the U.S. are contained in all the major versions of energy and climate legislation now before both houses of Congress. They are (1) a cap and a price on greenhouse gas emissions established either separately or in a Cap&Trade system, and (2) a Renewable Electricity Standard (RES) that creates the requirement for regulated utilities to obtain a significant portion of their power from New Energy sources by a date certain.

These alone would revive the economy, drive the growth of hundreds of thousands or perhaps even millions of good new jobs, revitalize U.S. manufacturing and expand the IT sector, boost exports and shift the nation away from reliance on foreign energy. Coincidentally, it would allow the U.S. to lead the world away from the brink of severe global climate change. One study suggested energy and climate legislation could generate $150 billion in revenues and create 1.7 million new net U.S. jobs. Another said 1.9 million new jobs.

The key is a comprehensive policy approach that creates incentives at every stage of the value chain and for every dimension of the market from manufacturing and infrastructure to the marketplace.

Can this President's recent bold call for action from Congress break the deadlock, get lawmakers past the health insurance reform stalemate and move vital energy and climate legislation forward? Stay tuned: The nation's economic future is at stake.

The main German policy tool was a feed-in tariff. (click to enlarge)

QUOTES
- From the report: “As the United States debates comprehensive clean-energy legislation, it is confronted with a simple choice: come to the table and feast on the enormous economic opportunity that comes with reducing global warming pollution or be an item on the menu as our economic competitors forge ahead to build prosperity.”

China's ambitious goals. (click to enlarge)

- Senator Linsdsay Graham (R-SC), member, Senate coalition seeking to write energy and climate legislation: "The momentum around this large cap-and-trade bill to save the planet has been replaced by a business model: How do we create jobs and stay ahead of the Chinese and clean up the air?…Once you start changing your perspective from 'Iowa is going to be beachfront property' to 'How do you create jobs and clean up the air?' you have a completely different focus…"

China's growth. (click to enlarge)
China's growth. (click to enlarge)

- From the report: “The United States has a clear moral imperative to join the worldwide effort to reverse climate change. But it also has an urgent economic imperative to become a clean-energy leader. The clean-energy achievements of China, Germany, and Spain represent a significant step in the fight against global warming pollution, but their driving motivation has been their own economic self-interest, through creating vibrant new industries, sustainable jobs, and international markets for clean-energy technologies…We can do the same and we can do better, but not if we use the excuse—as opponents of passing comprehensive energy and climate legislation frequently do—of temporarily weak economic conditions to delay the transformation to a clean energy economy. It is through a failure to act that the United States will suffer economically.”