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Asia’s Push for Clean Energy

August 4, 2009


President Obama was hoping that the stimulus package passed by Congress would be the key that would unlock the door to a cleaner energy future. He believed that green programs would create millions of jobs, stimulate innovation, and be good for the environment.

“President Obama has often described his push to fund ‘clean’ energy technology as key to America’s drive for international competitiveness as well as a way to combat climate change. ‘There’s no longer a question about whether the jobs and the industries of the 21st century will be centered around clean, renewable energy,’ he said on June 25. ‘The only question is: Which country will create these jobs and these industries? And I want that answer to be the United States of America.'” [Steve Mufson, cited below]

In discussions with world leaders, the President negotiated agreements to curb greenhouse gas emissions. Not all nations, however, have jumped on board. Some developing nations still believe that curbs on greenhouse gas emissions will curtail their opportunities for development and have pushed back against plans put forth by developed nations. Nevertheless, there is evidence that Asian nations could adopt green energy technologies faster than the United States [“Asian Nations Could Outpace U.S. in Developing Clean Energy,” by Steven Mufson, Washington Post, 16 July 2009].

“India, South Korea, China and Japan … are pouring money into renewable energy industries, funding research and development and setting ambitious targets for renewable energy use. These plans could outpace the programs in Obama’s economic stimulus package. … Even though developing nations refused to agree to an international ceiling for greenhouse gases, … China and other Asian nations are already devoting more attention to cutting their use of traditional fossil fuels such as oil, natural gas and coal.”

South Korea, for example, plans on investing “about 2 percent of its GDP annually in environment-related and renewable energy industries over the next five years, for a total of $84.5 billion.” Its R&D efforts are aimed not just at the country’s domestic energy sector but at the international energy market as well. According to Mufson, the South Korean government hopes to strengthen its position in “industries such as those that produce light-emitting diodes, solar batteries and hybrid cars.” When it comes to countries that really matter in the struggle to reduce greenhouse emissions, environmentalists look to China and India for help. Even though they are among the countries resisting mandatory targets, they are still pushing ahead in the search for cleaner energy. Mufson continues:

“China and India are kick-starting their solar industries. India aims to install 20 gigawatts of solar power by 2020, more than three times as much as the photovoltaic solar power installed by the entire world last year, the industry’s best year ever. And China’s new stimulus plan raises the nation’s 2020 target for solar power from 1.8 gigawatts to 20 gigawatts. (A gigawatt is about what a new nuclear power plant might generate.) … ‘A lot of people underestimate how focused China is on becoming a global leader in clean technology,’ said Brian Fan, senior director of research at the Cleantech Group, a market research firm. China now provides a $3-a-watt subsidy upfront for solar projects, he said, enough to cover about half the capital cost. Fan said it is ‘the most generous subsidy in the world’ for solar power. China is also expected to boost its long-term wind requirement to 150 gigawatts, up from the current 100 gigawatt target, by 2020, industry sources said. Jenkins said China could provide $44 billion to $66 billion for wind, solar, plug-in hybrid vehicles and other projects. Fan said China also plans to make sure that many of the orders go to its own firms, Gold Wind and Sinovel.”

America, of course, is hoping to become the clean technology leader of the world and to find new international markets for its products. With a slower than hoped for start, the U.S. might lose the race to fast-tracked Asian companies.

“Confident that the United States will develop top-notch technology, the House voted overwhelmingly on June 10 to oppose any global climate change treaty that weakens the intellectual property rights of American green technology. … But countries in Asia are not standing still waiting for U.S. advances. That both excites and worries U.S. manufacturers torn between opportunity and fear of a boost for Asian competitors at a time when the world’s biggest market, the United States, has slowed down sharply. ‘This is heavy manufacturing business. The U.S. has had a great position over the last several years,’ said Vic Abate, vice president of renewables at General Electric, the world’s number two wind turbine company. ‘If it slows down and if investment doubles down in China, it will be a lot harder to catch up.’ … Although GE is the only U.S. company among the world’s top 10 wind turbine makers (China has two, Germany has three), [Mark Levine, director of the environmental energy technologies division at Lawrence Berkeley National Laboratory] said ‘there are areas in wind energy where we are likely to develop crucial technologies that we will both exploit and likely license to others.’ He cited advanced materials that would permit stronger rotors and techniques for taking advantage of higher wind speeds at greater heights. Levine said the United States is unlikely to ‘become the or even a leading photovoltaic manufacturer. But our scientific talent . . . has a good chance of developing the next-generation PV systems which we could either manufacture in China or another country … or license to foreign companies. … Even if the manufacturing is done abroad, this will lead to very real and large benefits to the U.S. from licensing fees, not to say sales in the U.S. and elsewhere.'”

If Levine is correct, the news is mixed. President Obama was hoping that green technologies would create good jobs for Americans. If manufacturing jobs go overseas, those dreams may be dashed and the recovery from recession might not be as fast or as robust as the President hoped. One of the reasons that Asians are pushing harder for clean energy than the U.S. is that alternative energy sources offer a quicker way to electrify rural areas than traditional energy strategies. India is a prime example [“A Growing India Sets Goal to Harness Renewable Energy,” by Rama Lakshmi, Washington Post, 19 July 2009].

“In the new India, villagers in far-flung areas might have cellphones but live in darkness because they have no access to electricity. The cellphone network towers in the villages run on diesel-powered, smoke-spewing, portable generators. Indians say this is a clear example of how the country’s woefully inadequate power supply lags behind an expanding consumer market. About 56 percent of India’s 1.1 billion people do not have access to electricity. And as coal deposits dip and climate change concerns rise, it is becoming increasingly untenable for India to continue relying on coal-produced power, which accounts for 40 percent of its total greenhouse gas emissions.”

I’ve written before about India’s rising number of entrepreneurs and these entrepreneurs are expected to seize opportunities in the energy sector like they have in other sectors of the Indian economy.

“‘We need to get our act together,’ said Gauri Singh, joint secretary in India’s Ministry of New and Renewable Energy, which was set up 26 years ago, ‘because India is growing faster than anyone can imagine. Renewable energy will have to supplement conventional power supply. ‘Our priority is to achieve energy security and self-reliance. Climate change is not the main driver for renewable energy in India, it is a co-benefit,’ she added, echoing a debate in the United States, where renewable energy is being sold less as a way to save the planet than as a way to create new ‘green collar’ jobs. Despite the deepening energy crisis, renewable energy, predominantly wind and biomass, make up 3 percent of India’s total electricity production. Solar energy is not even a fraction of that, though India receives abundant sunshine throughout the year.”

As noted earlier, however, India has big plans for the future.

“The centerpiece of the plan is the National Solar Mission, which is aimed at harnessing India’s neglected energy source. Today, India’s solar companies say they generate so little electricity because of inadequate state support. ‘Unless the government guarantees that it will purchase solar power at a lucrative cost with feed-in tariffs, the industry will not take off. We end up exporting three-fourths of solar cells and photovoltaic modules to Europe,’ said an executive of a solar power company, speaking on the condition of anonymity. ‘The government has to cough up money and go beyond making the right noises about renewable energy.’ The government traditionally has given incentives for setting up green energy plants, but not for producing power. ‘Entrepreneurs made quick money by setting up plants, availing of tax benefits and then disappearing. Nobody was interested in ensuring that they actually produced electricity,’ said Vinuta Gopal, a climate change campaigner for Greenpeace India. Officials say they are determined to fix that in the coming months.”

With millions of people living in desperate poverty, India is hard-pressed to find government money to support green technologies. As a result, “solar companies are lighting up Indian homes directly.”

“‘In the last two years, we have developed a good off-grid rural market. We are selling solar home lighting systems that come with rooftop panels directly to villagers who have no access to electricity,’ said Anil Patni of Tata BP Solar, an Indian joint venture with the U.S.-based BP Solar. The company works with rural banks to offer small loans of about $300 to villagers to set up solar lighting systems. ‘But though the arrival of a solar lighting system transforms the life of the rural family, true economies of scale in solar power will come only with grid connectivity.’ The biggest challenge, officials say, is finding the money to nurture green energy industry until it becomes viable.”

In hoping to help Indians become more energy efficient, developers are building smaller houses (see my post Building Little Houses) and offering alternative energy amenities.

“Sanjay Tanwar said he has been deluged with calls since his construction company sent out text messages advertising an upcoming residential condominium. The complex will have sensor lighting, solar panels, heat-resistant insulated bricks and water harvesting systems. ‘People ask if the building will help reduce global warming,’ said Tanwar, a manager at the Lotus Boulevard apartments in Noida, a suburb of New Delhi. ‘The “green” word is proving to be a big magnet.'”

With every developed and developing country looking to create green-collar jobs, the race is on. Companies that move fastest to create effective and affordable products will have a leg up when the recession starts to break. Oil continues to hover above $65/barrel and that price will inevitably increase as economies begin to expand around the globe. As oil prices go up, companies with market-ready products will be positioned to take advantage of emerging opportunities.

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