The news became political fodder in a US mid-term election year
and has been highlighted as an example of the nation's failings. With US
jobs at stake people are worried, and for good reason.
That's one way to look at it. Another is that China's rise offers a
new and crucial opportunity. Paired, the countries can float a
tremendous clean energy market that could buoy the industry worldwide –
or sink it if they fail.
'Imagine a small canoe, barely above the waterline with two sumo
wrestlers, China and the US, in it – one at each end,' says Elton
Sherwin, senior managing director at California-based Ridgewood Capital
and author of the book Addicted to Energy.
The rest of the canoe, he says, is packed full of people from all of
the other countries. The two sumo wrestlers account for 42% of the
world's energy demand, are the world's biggest coal consumers and the
largest importers of oil. Both have aggressive goals to integrate
renewable energy into their supply mix and they lead the way in wind
power development. Last year China installed 13.8 GW of wind power, the
US added 10 GW.
A recent criss-crossing of the globe by industry leaders and
government officials from both nations demonstrates a heightened
understanding of their paired potential and they have been meeting to
investiagte joint green energy opportunities. China brings to the table
its cheap manufacturing capability and the US its high tech know-how.
'We can't view this as one against the other. Over the past 12
months, partnerships and collaborations and deals from the manufacturing
side all the way up to the development and installation side have
really taken off. It makes a lot of sense. We are working together on
the government side and private sector side to grow the pie and make it
beneficial and profitable for businesses in the US and China,' said
Foley & Lardner partner Jeffery Atkin.
One such meeting, a panel discussion entitled 'US-China Private
Sector Cooperation in Energy', brought together industry and government
heavy hitters in early October at the Woodrow Wilson Center in
Washington, D.C. Among the attendees was Jim Rogers, chief executive
officer of Duke Energy, one of the US' largest electricity companies.
'I believe that China and the US are uniquely positioned to answer
the environmental energy challenges for the globe,' he said at the
forum. 'We are smart enough and have a clear enough vision to be able to
cooperate and compete at the same time.'
While the two nations have many political and social differences,
both face similar challenges in their power sectors. Both depend heavily
on coal as a core energy resource; it accounts for 50% of the
electricity mix in the US and 80% in China, which in turn makes the two
countries the largest carbon dioxide emitters in the world. Also at the
forum was US secretary of commerce Gary Locke, who said: 'If not
addressed, this current energy mix will significantly impact our
businesses, our environment, and our way of life in both countries.'

China's success in wind turbine manufacturing has some in the US concerned (Source: Sinovel)
The Great Grid of China
In addition to many similarities in energy supply, both countries are
poised for enormous electricity transmission grid build-outs, which
will be required to meet increasing energy demand through to 2050.
Rogers sees a 'daunting challenge' ahead for the US. The nation will
need to spend an estimated $2.1 trillion to meet its electricity demand
by 2030, with consumption set to grow at an estimated rate of 0.5%/year
through to 2035.
Over the next 40 years almost all US power plants, with the exception
of its hydroelectric sites, will have to be retired and replaced, said
Rogers. This comes on top of the transmission and distribution overhaul
needed for smart grid applications.
Conversely, China will focus less on upgrading an outdated grid and
more on building new facilities. It has 700 million rural inhabitants,
15 million of whom, it is anticipated, will flock to its cities every
year. By 2025, China is expected to build 40 billion m² of floor space
across 5 million buildings – the equivalent of two Chicagos every year,
said Rogers.
Electricity consumption rises in line with higher average incomes
through the increased use of energy-hungry devices such as refrigerators
and air conditioning units. By 2030 an estimated $3.1 trillion will
need to have been spent to keep up with China's burgeoning demand.
With such levels of growth predicted in China and the US entirely new
power infrastructures in both are expected to be built in the next 40
years.
Big Problems, Big Solutions
With such daunting figures, it is an enormous challenge for the two
countries to simultaneously meet new demand and achieve reductions in
greenhouse gas emissions, but significant progress is afoot.
China has a five-year plan for renewables to account for 15% of its
energy mix on top of a 20% reduction in greenhouse gas emissions by
2020.
In just three years, the country became the world's largest producer
of photovoltaic panels, according to Pricewaterhouse Coopers' (PwC)
recently published document: 'US-China Cleantech Connection: Shaping a
new commercial diplomacy'.
The US is also making hefty strides in cleantech development, an
example being its solar industry, which by the end of the year is
expected have seen a year-on-year doubling in size, despite ongoing
global economic issues, according to trade group the Solar Energy
Industries Association.
The president and CEO of SEIA, Rhone Resch, recently announced a
target for the US to install 10 GW/year of solar by 2015. Simultaneously
the US government began to approve the construction of large
utility-scale solar plants on federal land. Construction work on several
large projects is expected to be underway by the end of the year.
Bolstered by strong government commitment over the past two years,
the US is shaping up to be the largest solar market in the world, with
its potential serving to attract Chinese companies including Suntech
Power Holdings. The company, the world's largest crystalline silicon PV
module producer, said earlier this year it plans to construct its first
manufacturing plant in the US, while Yingli Green Energy is also said to
be considering building a facility in the country.
Can The Marriage Work?
However, not everyone in the US welcomes expansion of Chinese
companies into the US clean tech market. One concern is that while China
may excel at cheap manufacturing, there may be quality issues with its
goods, a problem acknowledged in a recent report published by
Greenpeace, the Global Wind Energy Council, and the Chinese Renewable
Energy Industries Association.
Kumi Naidoo, executive director of Greenpeace International, said in
the report '2010 China Wind Power Outlook' that China remains dependent
on Europe and the US for key wind turbine design technology; that it
lacks experience in operating and maintaining wind farms; and that its
workers' skills are 'insufficient'.
'To face and address the long-term problems, China needs to learn
constantly, create opportunities for international cooperation and
communication,' he said. The country must also establish a 'cooperative
mechanism of win-win and multilateral wins with wind power corporations
and research institutes all over the world in order to learn other
countries' strong points, compensate for [its]own weak points, and
develop together'.
To date the Chinese solar industry has largely been driven by the
production rather than the utilisation of its PV technology. Indeed in
2009, one third of the world's PV panels were produced in China, yet
installations there accounted for less than 3% of the global total,
according to PwC.
Some quarters have voiced concerns that this allows Chinese
manufacturers to have less stringent quality standards. However, again
according to PwC, as China finds a new balance and moves from largely
being a solar technology producer into an adopter, an broad upturn in
quality to Western standards is expected to follow.
A technologically-innovative and growing Chinese market is also
expected to see more widespread applications in China itself, while
welcoming the country into the global market will force it to raise the
quality of the goods it manufactures.
The Chinese installation market remains wide open and therefore
provides a huge opportunity for US companies that produce high quality
products to seek to do business there.
In September 2009 US-based First Solar unveiled a memorandum of
understanding with Chinese government officials to build a 2 GW solar
power plant in the Mongolian desert. The development site, slated for
completion in 2019, requires cutting edge technology and high quality
components.
The growth of the clean technology sector in both countries is in
part due to the state of the industry in the other, with companies from
each becoming increasingly co-dependent. Bilateral trade and investment
between China and the US has given and continues to give citizens from
both countries greater access to high quality products and services,
according to Locke.
An example of this is the growth in China's middle class, which has
spurred demand for US products, helping US producers' order books and
satisfying Chinese consumers, while lower-cost products from China which
are being sold in the US mean a potential increase in the disposable
incomes of US citizens. 'That is what a win-win relationship looks
like,' said Locke.
Another major partnership opportunity between the US and China is the
development of smart grid technology. The PwC report forecast that
China could spend up to $100 billion over the next decade on smart grid
development, which could result in the deployment of 300 million smart
meters alone.
Not surprisingly, Intel Corporation recently consolidated its
chip-making operation in Chengdu into a 2400-employee facility and is
now the largest chip packaging and testing base in Asia.
To help US companies penetrate Chinese and other foreign markets, the
Obama administration in March launched the National Export Initiative,
which seeks to double exports from the United States over the next five
years.
'I am confident that our efforts and a sustained focus on the
National Export Initiative will allow the US, China and countries all
around the world to reap the benefits of the emerging clean energy
economy,' said Locke.
Entering the US market, however, is another story. Accessing this
market can pose difficulties for international companies owing to a
quagmire of local, state and federal regulations.
'The US is very complex compared with most other places in the world.
It is more time consuming. That is a reason why foreign companies, the
European companies, the Chinese companies, are joint venturing and
partnering with local companies,' said Foley & Lardner's Atkin.