Grist recently served up a rant post by Terry Tamminen, titled “China’s Rear View Mirror: China is leaving the U.S. in the dust as it surges ahead on clean energy.”
Tamminen, former secretary of the California Environmental Protection Agency and now an investment banker, recites a now common plaint that China is rapidly eclipsing the US in clean technology, the technology of the future. Tamminen cites huge domestic demand in China, and aggressive government policies pushing the greening of power. From the post:
Even as China overtakes the U.S. in the dubious category of “world’s leading greenhouse gas producer,” it is also well ahead of the U.S. in developing the technologies and policies to solve the problem—and selling those solutions to us at massive profits which could have been ours.
But with all due respect to Mr. Tamminen, he’s getting ahead of himself.
As the Wall Street Journal, the New York Times, a dozen other media outlets and research papers have all pointed out, state-mandated policies only go so far in pushing industries forward, cleantech included. For proof one need look no farther than the recently released Cleantech 100 list of the most promising firms in clean technology.
The list includes 55 American companies, 13 British, 10 German, 5 Israeli and even one from India. From the “cleantech behemoth” People’s Republic of China?
From the Wall Street Journal:
…China’s approach to clean tech is Chinese—that is, top-down, heavy-handed, and with none of the horse-trading that characterizes every U.S. debate about energy policy. Not for nothing did Tom Friedman entitle one of the chapters in “Hot, Flat, and Crowded” as “China for a Day.” The two pillars of China’s clean-energy boom have been massive government intervention and a heavy dose of protectionism.
And from the leading China Greentech Report (reg req.):
The benefits of China’s concentrated and state-dominated greentech markets are offset by poor incentives; lack of competition reduces efficiencies and innovation that come from open and competitive markets.
The Dragon is Coming! The Dragon is Coming!
While there are some sound economic reasons to be competitively concerned about China’s cleantech growth, Tamminen also displays a common and simplistic fear of Chinese dominance in everything from solar panels to lunar landings. Posing China as the great shibboleth makes sense to a country used to seeing the world as bipolar.
Before we lose our heads, however, remember that while many of our solar panels are made in China, so are many of our shoes and toys, and for the same reason: it’s cheaper. The have a large supply of cheap labor to build solar panels and wind turbines because per capita income is a measly $6000, another fact to remember when worrying about the Golden Dragon, as Timminen calls it.
The US meanwhile provides what does not exist in China, for the most part: a true culture of innovation, supported by a strong venture capital sector, and highly educated workers from around the world. Tamminen mentions that China is developing a 2 gigawatt solar plant. That plant, in Ordos City deal in Inner Mongolia, will be built by First Solar, an American company.
Tamminen also says China has “enough windmills for jousts with ten thousand Don Quixotes.” That may be true, but the United States still has the highest wind-power capacity and generation in the world.
Competition Means Never Sleeping
As First Solar’s CEO Michael Ahearn told Greentech Media, part of the reason the Chinese government invited the solar company to build the Mongolia plant is because they want — need — to learn how to build a large-scale solar PV plant. This illustrates the first point above, but should also serve as a warning against complacency.
Japan, after all, started out copying American know-how only to beat the pants off the U.S. in electronics and automobiles, first because of lower prices, and then because they built better cars and TVs (and kept costs low).
China has not shaken a reputation for exporting low-quality goods, and there is no reason to think this will not also be true for clean technology. If the US wants to make sure Americans are building solar panels ten or twenty years from now, American companies need to figure out how to build them better. As the Chinese get richer, labor costs will go up, and the market will go to those who build the best product.
Does this mean the US government should not play a part in supporting clean technology companies? Of course not. But let’s not get too jealous of the heavy hand of the Chinese government, even as it boosts some industries, it crushes others.