Our Bet On Clean Energy Innovation
The time to decide on a strategy to remain as #1 is slowly coming to an end. The U.S. has seen a jolt in economic activity as a result of the Recovery Act, but it’s all too clear that this alone won’t bring the U.S. economy back to sustainable growth over the long-term. We have entered a period where huge deficits are in order and the private sector won’t make a comeback where it used to prosper. Instead, something new must arise to fill the gap in economic activity after the U.S. government can no longer sustain the economy by issuing debt. The Obama administration has repeatedly said that it is “confident” that clean energy is the only sector that can fill that economic gap and pave the way to lower deficits, a higher trade surplus, and a better overall fiscal status.
Until very recently, the climate movement in the US, largely led by youth, was the main reason why clean energy had a future. The idea was that we had to develop clean energy to reduce our greenhouse gas emissions and slash our oil bill, which was financing “terrorists” and making the trade deficit worse. The youth climate movement was successful in making it clear that we better develop a clean energy economy to also create the jobs of the future and become the leader in this all-too-important sector. So today, the Obama administration understands that developing clean energy is all about creating jobs in the US and cleaning up the Federal books (though more importantly it’s about preventing runaway climate change). Whether “clean energy” means wind, solar, and geothermal or nuclear, clean coal, and biofuels is another debate. We know that nuclear, clean coal, and biofuels would not produce enough jobs compared to wind, solar, and geothermal, so I assume the outcome will be a mix, as Obama actually intends in his strategic political plan. However, Obama may be overoptimistic in thinking that the US can win the clean energy race under his plans.
First of all, unlike other industries of the past that generated big economic growth (think cars, Internet, IT, etc.), clean energy is something the entire world knows about and is working hard to get its hands on. While it takes Washington years to make any decision on clean energy, Asia and Europe have already been racing to develop the best clean energy technologies in the world. Out of the top 10 clean energy companies in the world, only one or two are from the U.S., while increasingly more and more Chinese clean energy companies are going public. That’s because China made the decision to take this market a few years ago, and it’s already succeeding.
According to the Apollo Alliance, a US labor organization that promotes a clean energy economy, the US already imports over 70% of all components for renewable energy projects. Most of this manufacturing is happening in China, which has already become the world’s largest manufacturer of wind turbines and solar components. With an economy that’s less than half the US economy, China is already spending more than twice as much than the US on clean energy, and plans to ramp it up further. And while experts have believed that China would focus on manufacturing while the US focuses on innovation, China is spending big on creating breakthrough technologies as well. Already, it is funneling $1 billion into the world’s first clean coal power plant that will capture carbon dioxide, and only because there’s less red tape in China to begin construction of such a plant.
The Breakthrough Institute has analyzed how much the U.S. would need to spend in order to remain competitive in this sector and truly create the technologies that will lead the market. According to its analysis, the U.S. will spend about $175 billion over the next five years on clean energy, including R&D and tax incentives. On the other hand, China alone plans to spend $397 billion, leaving the other “Asian Tigers” out. This leaves the U.S. at a significant disadvantage, making it highly unlikely to create the leading clean energy technologies that can fill it’s economic gap. Even passage of a climate bill in Congress, which would certainly put all serious action until at least 2014, would be insufficient to close this gap.
In the end, the numbers do show that the Obama administration’s bet on clean energy will probably not hold out. Asia will end up taking all the manufacturing jobs and exporting their technologies to the U.S., and the U.S. will have to look elsewhere for innovation in order to fill the economic gap. And while cloud computing has its promises, it will not create a market big enough to fill the gap. So, I wouldn’t bet on clean energy making it for the U.S. economy, even if there was a change in Washington. It is time for a drive in innovation in a variety of sectors, not just clean energy. It’s really the only way out.
Author’s note: I didn’t make any mention of EVs and high-speed trains because they’re in the transportation sector. While they are clean technologies, I wanted to focus on clean energy. Readers should know that the US is also behind in these other clean techs.