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Magazine / POLITICS

China's Great Leap Forward

If the U.S. hesitates in developing its clean-energy industry, China is preparing to race past it.

September 19, 2009

Two top U.S. energy executives are back from Asia with the same bracing message: China is moving aggressively to capture the jobs of the next energy economy.

Michael Ahearn, CEO of First Solar, a leading manufacturer of photovoltaic solar cells, and Jim Rogers, CEO of the big utility Duke Energy, recently signed agreements with Chinese counterparts to develop cutting-edge projects. And from those discussions, each man reached the same conclusion: China is shifting into a higher gear in its drive to dominate the clean technologies that will power the 21st century -- and the jobs that those new industries will create. "China has a sense of urgency about transforming to a more sustainable energy structure," Ahearn said.

Beijing's great leap forward on clean energy comes at a critical time for the United States. Clean-energy jobs are central to President Obama's strategy for long-term American prosperity. His stimulus plan embodied that priority by directing more than $50 billion in incentives toward renewable-energy sources such as solar, wind, and biomass.

 

But the other pillar of Obama's energy agenda is cracking. As the health care debate saps his momentum, the prospects are dimming for timely Senate action on legislation to cap the carbon dioxide emissions linked to climate change. Most experts consider such a cap indispensable to creating a competitive alternative-energy industry because it would compel coal and other fossil fuels to bear the cost of their contribution to climate disruption.

The experiences of Ahearn and Rogers point to the same conclusion: If the United States hesitates in developing its clean-energy industry, China is preparing to race past it.

China is hardly an environmental paragon. Dirty air and water remain endemic. The giant country still produces three-fourths of its electricity from coal, which spews more carbon than other fuels. And a recent government report said that China's steadily increasing carbon emissions should be allowed to continue rising until 2030.

But China's priorities are shifting, driven by domestic discontent over pollution, international pressure, and the desire to seize a growing economic opportunity. The country's wind capacity doubled last year and continues to grow rapidly. Now China is pursuing other clean-energy options. In August, the giant China Huaneng Group utility signed an agreement with North Carolina-based Duke Energy to jointly research alternative-energy sources, particularly coal-fired plants that could capture and store carbon emissions.

It's unclear whether that approach will prove technologically or financially feasible at scale. But Rogers, who backs the U.S. climate-change legislation, shrewdly observes that the Chinese utility's interest in exploring carbon capture speaks volumes. While Beijing has resisted international calls to limit its carbon emissions, Rogers notes, Chinese utility executives "are behaving as if... timetables and targets" for carbon reductions are coming eventually. "These guys are working feverishly to develop the technologies," he says.

The deal that Ahearn signed this month with Ordos, a city in Inner Mongolia, reinforces that conclusion. Under the agreement, Arizona-based First Solar will build a 2,000-megawatt solar photovoltaic facility big enough to power 3 million homes. The plant, to be completed in 2019, would be the world's largest such facility, but it would be only part of a giant Ordos complex whose combined renewable generation capacity, if fully completed, will equal about one-third of all the solar and wind power now installed in the United States.

First Solar warmed to the deal after China indicated it will soon impose a "feed-in tariff" for solar energy. That mechanism, which Europe has used to nurture its alternative-energy industry, guarantees renewable-power producers above-market rates for the electricity they generate. (China finalized a feed-in tariff for wind power in July.) Ahearn says that the tariff's "reliable price signal" will encourage renewable-energy investors and manufacturers to shift production toward China. That could threaten the U.S. lead in these technologies. "The risk is that the innovation starts to emanate from China because that's where the market is," he says. "Technology and production capacity will [follow] opportunity."

Ahearn and Rogers think that China's advantages in securing green manufacturing jobs could already be insuperable. The best way to reverse that verdict is to jump-start the U.S. clean-energy market through tools such as tougher renewable requirements on utilities and, especially, limits on carbon emissions. (Feed-in tariffs would require larger utility price increases than American consumers would probably accept.) If the United States fails to take bolder steps to meet China's challenge, the green shoots of the clean-energy economy may blossom mostly amid bamboo.

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