In his State of the Union Speech, President Obama issued the following statement: “The nation that leads the clean energy economy will be the nation that leads the global economy.” In the current clean energy climate, it would seem the President is speaking of China.
China now manufactures more solar cells than any nation in the world, and surpassed the United States as the largest market for wind turbines as early as 2009. China is also a world leader in advanced transportation technologies and batteries, is increasingly localizing the production of nuclear power plants, and has developed some of the world’s most advanced carbon capture and storage technology.
Nevertheless, the United States is a nation that unquestionably has the potential to regain this vital leadership position. Experts believe there needs to be a fundamental shift in mindset, followed by aggressive and swift action to create the markets, the financing and the infrastructure that can support both clean technology innovation and large-scale manufacturing.
Americans seem reluctant to move away from an energy portfolio that has served them so well in the past, and there are three possible reasons why the United States may be exhibiting a somewhat laissez-faire approach to the ‘clean energy race’. Firstly, there is a widespread belief that by not investing heavily in clean energy, the United States is able to ‘free-ride’ on the effort made by other nations. Secondly, there is the argument that the United States’ capacity for innovation will keep it competitive, maintaining the status quo where China dominate low-cost manufacturing, and the United States remained focused on technology creation. Finally, there is the acquiescent suggestion that Americans feel it is inevitable that China will dominate the clean energy industry given their low labour costs.
It is unquestionably true that more low-carbon power is a good thing for the earth’s climate, irrespective of who manufactures it. However, the United States is beginning to realize what China already know: the race to develop and deploy clean energy is more an economic issue, than an environmental one. This passive resignation to China’s clean technology dominance is one reason the United States is behind in clean energy today. For example, the United States renewable energy trade deficit has increased 1400% in just the last five years, to nearly $5.7 billion. Hence, although the United States invented the majority of the clean energy technologies in use today, they have largely been commercialized and produced elsewhere.
The United States’ heavy reliance on their reputation of innovation is beginning to lose traction, as it has become clear that research and development (R&D) is an area where perhaps the nation is becoming slightly stagnant. The United States led innovation post-World War II, investing heavily in science and technology, however, since the early 1980s, federal investment in innovation, particularly in energy technology, has remained static. Before the stimulus bill, the Federal government budget for energy research was the same today, adjusted for inflation, as it was in 1968.
However, before the practical driving factors are addressed, I believe there needs to be a fundamental shift in the public’s opinion of clean energy, and it is critical that this is framed in the context of the ‘clean energy race’. A unified mobilization is required similar to that initiated by President Kennedy during the ‘moon race’. Clean energy, it should be realized, is as much an issue of economic growth, employment, energy security and energy prices, as it is of climate change mitigation and environmental protection.
An invigorated and unified United States can then join most Asian and European countries in fighting for their share of the clean energy industry, an endeavor that their policymakers can pilot with the following instruments:
Firstly, at a federal level, there needs to be a credible and long-term pricing of carbon, creating a critically important incentive for the private sector to both innovate and manufacture. Economic studies illustrate that a tax is the most efficient instrument in the short-term, while a cap-and-trade scheme is more effective in the long-term. Most experts agree that, under uncertainty, a hybrid system would be most suited to the United States, creating the apposite environment for private investment. It is clear that several state-level and regional markets are developing; however, ‘Capitol Hill’ still urgently needs to overcome the past congressional failure, and reinstate the climate bills.
Secondly, a key driving factor, assuming sufficient demand is established, is to finance the full value chain of clean-energy solutions. The United States will need a program that encompasses a technology push – supporting research, development, commercialization, production and deployment. Although important, this is not simply a case of ramping up federal investment in R&D, but also creating a commercial environment in which the market-entry of new energy technologies is strongly encouraged.
Finally, there needs to be a focus on ground-level development, where the physical and human capital infrastructure is prepared to encourage a clean-energy transformation. Spain, for example, has installed a national renewable energy job-training centre, with programs for all sectors and skill levels. In the United States, the Green Jobs Act and the “Buy America” provisions in the ARRA should still be welcomed as steps in the right direction regarding the workforce and manufacturing infrastructure. Nonetheless, thus far there is still no permanent national policy regarding grid construction; in contrast, Europe and Britain are coordinating to build a ‘supergrid’ for offshore wind power, Spain are planning on using the electric vehicle as a stability tool, and China have aimed to install a ‘smartgrid’ by 2020.
In summary, a prosperous energy sector no longer simply requires the nationalization of underground carbon resources; it is now a race to develop clean-energy technologies, where substantial economic growth is at stake. It can be argued that the United States is lagging countries such as China and Germany in the clean energy race, and regaining the lead is, at first look, a seemingly insurmountable task given its current political and economic climate. However, history shows that with the right paradigm shift and sufficient incentives, the United States is capable of remarkable achievements. Clean energy is the new ‘industrial revolution’, and similarly, it requires the right markets to stimulate demand, strong federal and private financing, and sound ground-level infrastructure.