Will China leave America in the low-carbon dust?

The good news is that China and the United States are in a race for clean energy technology supremacy. It would seem to bode well that the world's two biggest carbon emitters are committed to leading the world in the development and deployment of solar and wind energy.

However, this is a race in which there may not be a clear winner. In fact, it seems clear that each country and the rest of the world would be better off if U.S. and Chinese leaders could reach an agreement to collaborate in developing this important emerging global industry. (GW)

CHINA: A race to win the clean-tech market, or an opportunity to cooperate?

By Lisa Friedman
Environment & Energy Daily
October 19, 2009

The third in an occasional series on China.

BAODING, China -- Water once ruled this teeming urban center, back when its most famous commodity was vegetables, when the farms outnumbered the apartments, and before the town's landmark 11-story building was surpassed by hundreds twice that size.

Equipment manufacturing was a major part of the economy in this one-time agricultural center about 85 miles southwest of Beijing, but the region's water quality also made film production one of the city's top industries. Digital cameras put a swift end to that, city leaders said. And so began the hunt for something new.

Baoding found it in "green" energy, specifically the manufacturing of wind turbines and solar photovoltaics (PV).

"We were searching for a new economy," said Lian Shujun, vice director of the administrative committee of Baoding National New and High-tech Industrial Development Zone.

"When we chose this PV industry, we didn't have another choice," he said. "The [film] market was shrinking, and we were looking for new opportunities to develop."

For Baoding, renewable energy production has never been about climate change, or even about helping China meet its goal of generating up to one-fifth of its energy from renewable sources by 2020. It was always about the jobs. And now it has them: about 20,000 in Baoding devoted to the production of wind and solar energy technology in a city that now sustains about 180 clean-technology firms.

The city is the kind of success story that environmental activists in the United States love to tout -- and with good reason: In 2007, 12 percent of Baoding's gross domestic product came from clean energy production, and the city is trying to boost that to 40 by midcentury.

Moving from vegetables to renewables

The warnings are everywhere: Unless the United States invests heavily in renewable energy and imposes regulations that force a switch away from fossil fuels, China soon will leave America in the low-carbon dust.

"They can win this one," Andreas Merkl, director of global initiatives for ClimateWorks, a San Francisco-based nonprofit, said recently of China's chances in the green technology race.

Politicians and policymakers have sounded the alarm, as well. Sen. John Kerry (D-Mass.), chairman of the Senate Foreign Relations Committee, announced at a recent hearing that China is "going to lead us on solar," adding, "If we don't get our act together, we're going to be chasing China in three or four years."

Likewise, U.S. climate envoy Todd Stern, as he works to prod members of Congress who are nervous about losing manufacturing competitiveness to China to embrace an international emissions pact, has been going around the country telling leaders, "We may spend the next few years pushing China to do more, but will then spend all the years after that chasing them as they hurtle profitably down the road to the low-carbon transformation."

But the full story of China's clean energy development, experts there and in the United States acknowledge, is a lot more complicated. The reality, they say, is a wind and solar industry hindered by production quality problems, heavily subsidized, lacking Ameica's technological innovation, and beset by the economic crisis as well as by a backlash against feed-in tarrifs in Germany and Spain.

"When we talk about China on its way to being a leader in the clean-technology sector, it's useful to parse out what that means," said Julian Wong, a senior policy analyst with the Center for American Progress who writes a blog called "The Green Leap Forward."

A more difficult shift than some people think

"Are we talking about innovation in creating new intellectual property? Are we talking about manufacturing? Deployment and installation? Exports?" Wong asked. "Somehow, the notion that China is going to be a clean-technology leader strikes people as odd. They say, 'Isn't the U.S. leading in that?' Absolutely it is. That's not China's strong suit at the moment."

Added Joanna Lewis, a Georgetown University professor and expert in China's energy outlook, "In many ways, China is a few years ahead of us in promoting renewable energy technologies. Many of the signs we see coming out of China are just amazing growth, but also big challenges."

Where China blows the United States away, Wong and others say, is in manufacturing. Currently, China is one of the largest manufacturers of solar-energy products in the world. Baoding, for example, is home to Yingli Green Energy, one of the world's largest solar firms, which last month was busy with the new construction of a new operations base.

The municipal government of Shanghai recently launched an initiative to install PV systems on 100,000 of the city's 6 million rooftops. Arizona-based First Solar Inc. is planning to build the world's largest solar plant in China's Gobi Desert, a 2-gigawatt project that will generate enough electricity to power 3 million Chinese homes.

Meanwhile, the Chinese government recently announced a "Golden Sun" program for the deployment of 500 megawatts of large-scale solar PV projects throughout the country.

Lewis noted that currently, more than 90 percent of the solar panels manufactured in China are exported to the European Union and other countries where the market is subsidized.

Jump-starting a domestic solar market

"That really had been propping up the Chinese industry," Lewis said. But when the global economy declined just as China started to ramp up solar production, some quick gear-shifting was in order. Without a domestic market, Lewis said, the Chinese government opted to create one.

The current stimulus funding to help support the industry "is something you never had before" in China, Lewis said. "There's some very impressive policies in place, and you could see solar energy really start to take off there."

Still, Wong noted, quantity doesn't necessarily translate into high-tech quality where PV panels in China are concerned. "They're great at manufacturing, but China is not where you get the most efficient panels," he said.

Wind has its own story to tell.

According to the Center for American Progress, China's total wind energy capacity doubled in each of the past four years. Now the nation is expected to blow past the United States to become the largest installer of new capacity in the world. Meanwhile, a recent study by Harvard and Beijing's Tsinghua University found that wind power could supply 15 percent of China's electricity by 2030 with a $900 billion investment.

In Hebei province, the China Energy Conservation Investment Corp. (CECIC)-- a state-owned company specializing in environmental protection -- has launched a 1-gigawatt wind farm among the grazing cows and sweeping Inner Mongolia grasslands.

So far, the subsidiary company, CECIC Wind Power (Zhangbei) Yunwei Co., has installed 200 megawatts of power, and a few years ago, it started producing turbines, as well. The factory has the largest wind capacity in China, employs 45 people, and is planning a model storage base on site.

"There was an explosive change in 2006," the company's general manager, Hui Deng, explains. "Since the government really thinks this is the right thing to do, they invested lots of money into wind." It's transforming the local economy, too, Hui maintains.

Plowing money into wind

This region, which in ancient times connected central China with Mongolia, is one of the most poverty-stricken in the country. Outside of some agricultural processing and a sugar factory, the high altitude and poor soil have made farming a bad gamble on these plains. At the nearby village of Bai Bulou, plastic tarps are sealed over the windows and cows graze among the poles of the windmills.

Local residents say the wind farm provided some temporary jobs but few permanent ones. Still, Hui said, he has seen the industry steadily improve the county's economic prospects.

"When we first moved here in 2002, it was really poor. You could barely see any high buildings," he said. But last year, the wind industry brought in 200 million yuan (about $20 million) in taxes. "Definitely, wind is going to be the top industry contributing to the local economy soon," he said.

Georgetown University's Lewis said that as recently as five years ago, most wind turbines in China were foreign-owned. Now, about three-quarters of the capacity is from Chinese companies. Still, she said, there are gaps even in this success story.

"From the outside, it looks like China is about to dominate on wind. But once you dig down, you see the market has shifted," she said.

But, she added, the data that are coming in through China's involvement in a U.N.-led offset program are starting to indicate that wind capacity is low and the energy technology is not performing well there. The reasons range from poor wind resources in some cities to inadequate mapping and in some cases lower-quality turbine production.

Manufacturing skills, but product quality needs work

Wong noted that the United Nations' Clean Development Mechanism, by which European and other regulated companies could offset their emissions by funding clean energy projects in developing countries, helped catalyze the wind industry in China. But the zooming capacity, he pointed out, "doesn't necessarily translate into the amount of energy generated." The full extent of China's wind generation still has to wait for a build-up of the country's electricity grid and a marked improvement in the quality of the country's turbines, he said.

A new study out just last week by Industrial Info Resources found that China's wind power manufacturing is "excessively over-developed," with the Inner Mongolia region alone having an installed wind power capacity of 3,000 megawatts. The area is expected to top 5,000 megawatts by the end of 2010.

Meanwhile, the question remains: How much of an impact is all this renewable energy development having on China's emissions? So far, analysts said, not much.

China's original goal was to develop 15 percent of its energy generation from renewable sources by 2020, a goal it is poised to surpass. But at the moment, wind and solar energy still accounts for only about 1 percent of the coal-dependent country's energy.

Analysts said that while China is starting to subsidize solar use domestically, the subsidies still remain low overall and are not yet able to make the green technology competitive with coal. But even with a greater push, Lewis said, renewable energy is likely only going to be one piece of a climate strategy that ultimately will need to directly address rampant rising coal production.

Meanwhile, policy experts argued, the United States and China need not look at clean energy production as a "race."

"Overall, the entire world stands to benefit from China's ability to manufacture renewable energy technologies," Lewis said. "This will make these technologies more affordable and accessible, particularly in the developing world.

"It doesn't need to be a competition," she said. "We're going to need a lot of them."