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The
global race to develop clean technology is not just about who can build
the best solar parks or wind farms. It is also shaping up as a contest
between Chinese-style capitalism and the more market-oriented approach
fancied by the United States and Europe…[W]ill China's highly
capitalized command-and-control economy trump laissez-faire in a
low-carbon shift that is widely portrayed as the next industrial
revolution?
The Chinese are coming on strong…Beijing's top
leaders have made clear their intention to have their nation dominate
this new industry, up and down the value ladder…[T]hey are not burdened
by concerns facing their Western counterparts -- such as the impact of
wind turbines on landscapes, higher energy prices for consumers, or
investor returns…The recession has made it tougher for Europe and
America to effect meaningful climate policy change...[P]oliticians
likely will find it harder to earmark additional voter money for clean
technology…Instead, recession-hit Western economies are hoping the
private sector can plug an estimated worldwide $150 billion annual
funding gap to avoid more extreme droughts and floods.
But
investors almost always follow the returns, and if the performance is
not there, they are not likely to risk their capital…[P]ension funds --
which are as influential as they are big -- [may not invest more
because fund managers must answer] to pension holders…Since a trough in
global equities last March, energy efficiency stocks have risen 126
percent and clean energy and technology by 88 percent, compared with
wider global stocks' 70 percent...But there are limited opportunities
for investors. Oil majors, for example, dwarf the asset value of green
companies, and cleantech funds can't move the dial for the big funds…
The
global wind industry highlights diverging tactics between China and the
West in developing important new markets…China is leapfrogging global
wind power rankings with a combination of aggressive growth targets and
domestic support. It has doubled its entire installed capacity each
year since 2005…This month, the British government announced plans for
32 gigawatts of offshore wind by 2020…[but the plan] depends on 100
billion pounds of increasingly finicky private capital. And this is an
election year…British policymakers have to make a choice: either create
bigger incentives for investors to underwrite offshore wind power or
impose additional taxes on fossil fuels, which would make carbon-based
energy less profitable.
Hesitating growth. (click to enlarge)
China
has its own distinct advantages. First and foremost is…[cooperation]
between state-owned utilities, grid companies and banks…China is
expected to announce a target soon for about 150 gigawatts of wind
power by 2020, which it would hit if it simply maintained present
annual capacity growth…The country also has two turbine makers, Sinovel
and Goldwind, in the world top 10…[China’s] next five-year development
plan [will] run from the start of 2011..[and] the state banks and state
power companies will support and foster the New Energy industries]…
How
fast wind power develops in the United States depends on a climate and
energy bill…But China has been on a tear…Some Western analysts still
believe a markets-oriented approach works best and will ultimately
prevail…They argue that subsidized inputs will result in a less
efficient industry, more focused on volume than cost and quality…[N]ew
capacity has also run ahead of grid connections…[Many] believe the
United States still has an advantage in innovation…[O]f 41 U.S. venture
capital investors, more than three-quarters [told Reuters] the United
States would be the best market for cleantech over the next five years,
and 88 percent believed America was the best [base]...China ranked as
the second best market…
An undeniable edge for China is its
huge pile of foreign exchange reserves…[and] Beijing's aggressive
economic stimulus, which included funds for energy-efficient
buildings…[A]n overheating Chinese economy may turn that tap
down...Western economies are expected to spend much of their green
recovery cash this year and next…In recession-battered Western nations,
and in China, the prime motives for promoting clean technology are
jobs, profits and energy security -- not climate change…An estimated
$150 billion invested globally last year was only about half what is
required annually by 2015 to avoid dangerous climate change...
Can the turmoil of a free market match this commanded, controlled growth? (click to enlarge)
If
over the next 20 years the world is to boost renewable power, build
greener buildings and roll out more fuel-scrimping cars including
hybrid and electric models, it must invest more than an additional $500
billion annually…Many forms of renewable power are expected to be more
expensive than their fossil fuel counterparts for at least another
decade…Given the incompatibility of communist-style targets with
western democracies, how can free markets mobilize more green
technology cash?
Western nations could boost clean investor
returns with a tax on fossil fuels or guaranteed higher prices for
renewable power. And...governments could adopt standards...requiring
homes to install smart meters, for example...[but this] doesn't seem
politically palatable at the moment…But pension funds and other
institutional investors can do more. Even if they don't put more of
their own money into clean tech, they can use their clout to encourage
more conventional energy companies to clean up…A discouraging sign...is
the cloudy future of cap-and-trade plans…Opposition to cap-and-trade
among U.S. Republicans and some Democrats could block the roll-out of a
federal trading scheme…[and] last month's U.N. summit in Copenhagen
[did not advance an international system]… Does all this suggest China
is destined to win the clean tech race? Hardly, though it does seem to
have a little more forward momentum...But it's still very early goings,
and there's more at stake than business success.
posted by Herman K. Trabish
Is clean tech China's moon shot?; So far, wind turbines are not Sputnik. But one day they could be.
Gerard Wynn (w/Chris Buckley, Larry Aragon, Peter Henderson, Jim Impoco and Sara Ledwith), January 27, 2010 (Reuters)
