The fight for leadership in clean-tech is underway. The next decade will prove pivotal in determining where the Silicon Valley of clean-tech will reside. While the U.S. is now putting considerable resources into clean-tech, the strongest competitor has only just entered the contest.
Announced in July, China’s Golden Sun program will increase installed capacity of solar power by five times its 2008 level in the next 2-3 years. China also initiated a residential program to subsidize solar. The nation has quickly emerged as a major player in one of renewable energy’s key sectors. Furthermore, China earmarked nearly $100 billion of economic stimulus for projects related to climate change. This is not to mention the enormous growth of the wind power industry in China, which required Chinese lawmakers to double their wind power prediction for 2010. The country plans to add wind capacity to match the massive Three Gorges Dam within the next decade. All the while, China has strict protectionist rules limiting the beneficiaries to local companies. The likely best hope for foreign entities is to collaborate with their Chinese counterparts similar to the success of American automakers.
Meanwhile, the U.S. renewed its solar subsidy last year, the Investment Tax Credit (ITC) through 2016, in hopes of stimulating demand growth. The American Recovery and Reinvestment Act put aside a little over half China’s sum for energy-related projects. The U.S. hopes the greening of the economy will bring resurgence to the manufacturing sector and retain its leadership in technological innovation while simultaneously lowering greenhouse gas emissions in order to combat climate change. Reforming U.S. energy policy is one of the main pillars of the President Obama’s agenda. However, with healthcare reform dragging, Congress could delay cap-and-trade unless President Obama takes the lead.
The fundamental difference between China and the U.S. reveals itself in the push to stimulate clean-tech. With an open and vibrant democracy, the U.S. is stumbling its way through energy policy reform. The creation of market mechanisms like cap-and-trade or tax incentives is a typical solution from the American system. Until recently, the U.S. relied almost entirely on the states to act as incubators for new policy. The particular winners are unclear and the government will likely use the power of the consumer to drive renewable energy growth. On the contrary, China’s command-and-control methodology dumps heaps of money into clean-tech directly leading to marked growth in the country’s wind and solar industries. They spread the wealth through provisions such as the Golden Sun’s requirement that no province can get more than 20MW of new capacity from the program. Indeed, this new space race could prove to be the next ideological test for the United States.