November 19, 2009

Cleantech Competitiveness

NQKPVCZB9Q6D A couple of days ago, I published a post regarding Chinese interests in U.S. cleantech initiatives entitled U.S. Stimulus, Cleantechs, and Foreign Investment. At the end of the post, as a reference to calls that federal subsidies be pulled from a particular project because it used Chinese turbines, I wrote that the U.S. needed to become more competitive in cleantechs, not protectionist.

Yesterday, Oakland-based policy group the Breakthrough Institute and the Information Technology and Innovation Foundation, a nonpartisan research and educational institute in Washington, jointly issued a report entitled Rising Tigers, Sleeping Giants, in which they state that “Asia is poised to dominate the fast-growing clean energy industry by outspending the United States by at least three-to-one on infrastructure and technology”.

The governments of China, Japan and South Korea will invest $519 billion in clean technology between 2009 and 2013, compared to $172 billion by the U.S. government. Climate and energy legislation, which passed the House in June, would contribute $28.7 billion of the $172 billion five year total. China alone will spend $440 billion to $660 billion over the next ten years on cleantech. If U.S. legislators like Senator Charles Schumer (D-NY) oppose that a vast majority of U.S. cleantech investments should go to foreign companies (thus far 84% of American Recovery and Reinvestment Act funds in cleantech), then more must be done to boost domestic competitiveness. Sporadic, shovel-ready projects will fail in the face of direct, immediate, and coordinated Asian government investments that allow their nations to create innovation "clusters" of manufacturers, universities, R&D labs, suppliers and other firms (a strategy copied from the Pentagon that helped create Silicon Valley in the 50s and 60s).

Venture capital may be part of the answer to the problem, but only so far as those VCs are only interested in U.S. ventures. VCs are looking for profits, and these clusters will be attractive to them. U.S. firms, according to the report, are already making large investments in China. Between 2000 and 2008, the U.S. attracted $52 billion in private capital for renewable energy technologies, but China alone attracted $41 billion. China secured more private investment in renewables and efficiency technologies than the U.S. for the first time in 2008.

The report expresses that "to regain economic leadership in the global clean energy industry, U.S. energy policy must include large, direct and coordinated investments in clean technology R&D, manufacturing, deployment, and infrastructure." If Republicans and moderate Democrats in Congress oppose clean energy legislation on the grounds that it will kill jobs, they may in fact hinder the creation of jobs in a global vertical where economic growth is assured.

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