In clean energy, U.S. innovates but builds slowly

March 24, 2010 9:01 PM PDT

by Martin LaMonica

If you follow the money, the numbers show that the U.S. is being outpaced by China and other countries in a global race to develop green-technology industries.

The Pew Charitable Trusts, in conjunction with Bloomberg New Energy Finance, is publishing a report on Thursday that characterizes different countries in developing and adopting clean-energy technologies.

(Credit: Pew Charitable Trusts) The U.S. is strong when it comes to technical innovation, with venture capital and private equity outpacing other countries. But China last year took the lead in "asset financing," or investment in renewable-energy projects. It also is poised to pass the U.S. as the country with the most installed capacity of renewable energy this year.

Although technical innovations play a big role in bringing down the cost of solar or biofuels, large-scale installations of clean-energy products is the key lever to bringing down cost compared to fossil fuels.

"We've come a long way, particularly with solar, but the question is which country will get us across the finish line (of cost parity with fossil fuels)? Which country will get us to the promised land?" said Ethan Zindler, the head of North American research at Bloomberg New Energy Finance, during a conference call on Wednesday. "In the meantime, we need subsidies so we can have scale-up."

Last year, China plowed $34.6 billion into clean-energy financing, compared to $18.6 billion in the U.S., $11.2 billion in the U.K., and $10.8 billion in the rest of the European Union.

The most dramatic change in the past two years has been China's industrial policy to expand into solar, wind, and other energy-related technologies, Zindler said. "The government recognizes the strategic opportunity of exporting clean-energy equipment," he said. "They clearly want to get out ahead of it."

Executives at many U.S.-based clean-energy companies say they will build projects where there is available financing, so the technology may be developed in the U.S. but deployed in other places.

"We're very good at creating companies. But we're not doing as well in the renewable-energy space at creating markets, so the markets tend to be elsewhere," said John Woolard, the CEO of solar company BrightSource Energy, who was on the conference call.

Murky policy

Government policies play a large role in how rapidly these energy products are adopted. In the past, German and Spain had generous subsidies for wind and solar, which helped ramp up manufacturing and bring down the cost of electricity from those sources.

Looking for a clean-energy home run (photos)

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The U.S. policy toward renewable energy, meanwhile, has been inconsistent and tended to swing with each new administration. Business people in the clean-energy field argue that a long-term policy is needed so that financiers will invest in projects, such as wind and solar farms, which yield money over several years.

Specifically, the U.S. should adopt a national renewable-energy standard that mandates that utilities generate a percentage of their power from renewable sources, said Phyllis Cuttino, the global warming campaign director from the Pew Environment Group. She endorsed other policies, including a price on carbon emissions as well as a research and development tax credit for companies.

"The facts show that the U.S. trails in half a dozen categories," she said. "The U.S. is at a critical junction--either it will lead or follow."

Although health care has dominated in Washington over the past several months, members of Congress have also been working on a combined energy and climate bill that can gain enough support from both major parties. Notable is an effort led by Sens. John Kerry (D-Mass.), Lindsey Graham (R-S.C.), and Joseph Lieberman (I-Conn.) to craft a bill that puts a cap on carbon emissions, expands natural gas and nuclear energy, and has support from polluting industries.

Clean-energy policies typically appeal to all types of voters--those that favor energy security and increased use of domestic energy, those concerned with economic growth and job creation, and those interested in protecting the environment.

Story of solar star BrightSource

Saying that the U.S. lacks a coherent energy policy is a common theme among green-tech start-ups and investors.

At the ARPA-E Summit earlier this month, there were a number of energy technologies on display but speakers often returned to the need for predictable rules for companies to attract financing and commercialize their products.

Woolard of BrightSource Energy echoed that view. Even without a comprehensive energy and climate bill, the renewable-energy industry would benefit greatly by extending the cash grant subsidy for solar and wind projects, which is set to expire at the end of this year, to 2016. Also, the U.S. needs to have a national transmission policy to build new lines to carry solar and wind power across the country, he said.

BrightSource, which builds utility-scale solar thermal power plants, is one of the most successful companies to come out of a wave of green-tech start-ups in the past five years.

The company is perhaps the furthest along than others in plans to build large-scale solar plants in the U.S., but it still faces challenges in getting local permits in the California desert where its first plant is planned.

Even though the company has raised $160 million from venture capitalists and corporate partners, it also secured a $1.37 billion loan guarantee from the U.S. Department of Energy for its Ivanpah project, which would be first utility-scale solar plant built in the U.S. in about 20 years.

Those loans are particularly important for new technologies because banks and project financiers are not willing to fund projects with technology risk, said Woolard. Once initial projects are successfully built, risk-averse bankers are more likely to invest, he said.

Comments

by ferricoxide March 24, 2010 11:54 PM PDT
Except that what China's looking to do is less about meeting their own energy needs via "green" energy than it is about making it so that EVERYONE has to buy the technology from them.

Like this 2 people like this comment
by jfg77 March 25, 2010 2:26 AM PDT
@ferricoxide,

it's incredible for such anti-china-ism. what's wrong with them putting money and labor into green technology, master them and become leaders in the space and then make a buck or two?

toyota or GM's intention of developping hybrid technology is for environment or for profit? what's wrong with that?

Like this 2 people like this comment
by PhilipHa March 25, 2010 5:52 AM PDT
I think the comment 'China has a lot of ground to make up' is a long way from the truth. Although Chinese cities are heavily polluted, the USA's per capita CO2 emmissions are 4 times those of China (2006), and at China's current rate of spending it will soon overtake the rest of the world in terms of installed renewable energy capacity. Last year it spent 50% more than the US on installing new capacity and this rate of investment is continuing to rise rapidly. I think there is misplaced complacency in the US about global warming emmissions particularly in relation to China. As the aryticle points out, it is likely that the US will be buying much of its renewable energy technology from China in the near future if it doesn't resolve many of the issues outlined in the article.

Like this by Renegade Knight March 25, 2010 7:52 AM PDT
@PhilipHa

You missed the point. China has a long ways to go to develop power infrastructure. Meaning that in a lot of cases it's easier to "go gree" to meet growing demand.

C02 emmisions are a side effect of past and present development.
Like this by weegg March 25, 2010 6:14 AM PDT
Although, China is building on average 2 coal plants per week, so they are still spewing CO2.

Like this Reply to this comment 1 person likes this comment
by martin_c_e March 25, 2010 6:29 AM PDT
We should not compare the USA to Spain or Germany. We are a diverse nation with energy needs which are different throughout the nation. Each state should continue to set its own policies. The Feds should probably subsidize green energy via taxing diesel & gasoline taxes.

Like this Reply to this comment by Renegade Knight March 25, 2010 7:53 AM PDT
Good point. The electricity I need to run my AC, power my Furnace, and my computer is completely different from that European elecricity...

Like this by mike_ekim March 25, 2010 6:50 AM PDT
I don't believe that graph includes nuclear. USA is funding upcoming nuclear, and the potential damage by those plants is less than the garanteed damage caused by China's 2 coal plants per week.

Like this Reply to this comment by mlamonica March 25, 2010 10:31 AM PDT
MIT professor Andrew Kadak gave a talk on nuclear power and China at the MIT Energy conference a few weeks ago where he said that a number of nuclear plants are being built now in China and the industry is expanding rapidly.

You can read some of his comments here:
http://news.cnet.com/8301-11128_3-10465392-54.html?tag=mncol
http://theenergycollective.com/TheEnergyCollective/60393

Like this by USDecliningDollar March 25, 2010 9:07 AM PDT
The problem is that China has the $$$ to invest in green tech projects. We have to borrow money from China to keep the country afloat. All of the things that you buy, basically come from China, your money flows out of the US and into China, China uses this money to invest in new projects, industry and manufacturing. Since we have stopped practically all manufacturing in this country, we are left to flip each other's burgers and buy crap made in another country. When we flip each other's burgers and buy products made somewhere else, there is a net outflow of $$$.

Like this Reply to this comment by Joe Real March 25, 2010 10:22 AM PDT
It is true that the absolute number of renewable and clean energy investment infrastructure projects in China is the number one in the world, but one has to look at per capita basis. Perhaps on a per capita basis for green energy, the US is number one with China near the bottom of the list, after all, the US has the highest energy consumption per capita in the world. China has really to invest more to feed its population wanting to have higher standard of living and energy consumption as the western worlds, so it has a long long way to go.

I am just hoping that China will stop copying the US technologies and innovations, only to manufacture them first, very cheaply and then sell back to the world, undercutting prices, making the US investments in R&D fruitless.