February 16, 2010
Are We Hypocrites on China?
As the global community gets serious about supporting renewable energy and dealing with climate change, all eyes are on China. Most people view China as a player that will either make or break any international climate agreement. So why then, do people in the U.S. get so upset when China actually starts taking action on energy issues?
For example, last November a $1.5 billion, 600 MW wind project was announced for Texas. The project, which may qualify for stimulus funds, would be financed by American and Chinese investors and use 240 wind turbines manufactured in China. Many policymakers expressed deep outrage that stimulus dollars would be used to create manufacturing jobs overseas, rather than in the U.S.
In an attempt to assuage fears, the Chinese company providing the turbines announced shortly after that it would construct an 1,100 MW-a-year turbine manufacturing plant somewhere in the U.S. However, many policymakers and renewable energy advocates are still skeptical of the deal. For some reason, many of those same politicians barely said a word when Spain-based developer Iberdrola received more than $500 million in stimulus funds a month earlier.
Concerns like these are nothing new. Now that China is becoming a major player in manufacturing and deploying renewable energy equipment, there are growing concerns about how the country will impact the dynamics of this burgeoning industry in the U.S. The situation puts America in an uncomfortable position: We fully support China's aggressive expansion of renewables, but can we handle the consequences?
We won't just import more products from Chinese companies. We'll also import more products from American companies that are setting up shop in China. In recent months, we've seen some solar and battery companies move operations overseas, despite being offered large incentives from state governments. In the end, states can't always compete with China. People are now asking, "Will the clean energy revolution even take place here?"
Those fears are certainly valid, but some would argue they are not always warranted. A number of leading Chinese solar companies in an effort to meet the demand of local markets and build trust in their brands have announced new manufacturing facilities in the U.S. In addition, the more we engage China in trading these products, the more opportunities American companies will have to sell into the rapidly-growing Chinese market.
The Obama Administration has been pushing for more cooperation between China and the U.S. on renewable energy issues. As it turns out, on the same day the 600 MW Texas wind project was announced, China lifted its requirement for local wind turbines and components. That could be a boon for American and European manufacturers. After all, along with being the world's biggest emitter of carbon, China is also now the world's largest wind market.
"It is a win-win for the U.S. and China to cooperate as much as possible on renewable energy development. It only serves to help everyone if we welcome each other into each other's markets," says Lou Schwartz, an expert on the Chinese energy markets. "We need China and China needs us."
In other words, it all comes out in the wash.
"I think we have to avoid very narrowly looking at one deal or another and reaching the conclusion that somehow China is up and we're down...Over time, there will be plenty of business in China for U.S. manufacturers," says Schwartz.
That doesn't necessarily ease fears about U.S. jobs going overseas today. Much of the interest in renewable energy revolves around the promise of domestic manufacturing jobs. What if American products can't compete with Chinese products? Won't that put a damper on the U.S. renewable energy manufacturing sector?
These worries are also legitimate. But if our ultimate goal is to drive down the cost of renewable energy as quickly as possible, I'm all for China helping that process along.
"China needs to play a role if we are going to bring the cost of solar down to match the cost of generating energy from fossil fuels," says Steve Chan, chief strategy officer for Suntech Power, a top Chinese solar manufacturer.
China will certainly become more prominent as the renewable energy industry grows. Solar and wind resources are local, but the market for equipment to harness those resources is global. If we want the Chinese to do something about their dirty energy problem, we'd better be prepared to compete with them too.
This puts us in a tricky situation. Do we want to support cost reductions in manufacturing at the expense of local jobs? Is it hypocritical to push China to deal with climate change and then not deal with the consequences? And if we're so worried about China, can we even say if the U.S. will lose out in the deal?
The answers are not clear cut. We've only begun to see how China will impact the industry. But it is clear that the country is now a major force in renewable energy. And however you see that development–good or bad–this is only the beginning.