China: A Nation with a Plan to Succeed in Clean Energy

Every five years, China's Central Government issues a new Five-Year Plan (FYP), a detailed outline of the country’s economic goals for the upcoming  ve-year period. The current FYP—the 12th—covers the period from 2011to 2015.

The 12th FYP, which has been hailed as the “greenest” ever, calls for an increase in non-fossil fuel use to satisfy 11.4 percent of electricity demand. It also singles out seven “Strategic Emerging Industries” for special support, three of which are based on emerging energy technologies: new energy, energy conservation and environmental protection, and clean-energy vehicles. The Chinese government plans to invest hundreds of billions of dollars in developing these industries over the period covered by the Plan.

It is clear that China views clean energy as a strategic priority and wants to secure a commanding global position in industries ranging from solar panels and wind turbines to smart meters and electric vehicles. This carries both opportunities and threats for the rest of the world.

The major benefit is that the dramatic expansion in Chinese clean energy manufacturing is helping to drive steep declines in prices for these technologies, making them more accessible and competitive.

The major drawback, however, is that the flood of cheap products on the global market is putting significant pressure on non-Chinese manufacturers. Numerous U.S. and European clean energy companies have been forced into bankruptcy, and survivors are scraping by on razor-thin margins. There is growing concern that China’s subsidies are anti-competitive, and therefore violate international trade agreements. Earlier this year the U.S. Department of Commerce made just such a  nding regarding China’s support for its solar companies, and authorized retaliatory tariffs.

Regardless of the ultimate outcome of these trade disputes, however, the Chinese clean energy juggernaut shows no signs of slowing. China wants to win the global clean energy race, and it’s not hard to see why. Driven by growing concerns about climate change, pollution, and rising prices for coal and oil, demand for clean energy is growing rapidly. The sector is poised to become big business in the decades ahead.

So, is the U.S. response to the Chinese challenge limited to defensive measures? Or does the U.S. have its own affirmative plan to lead? Unfortunately, not really. The U.S. is blessed with an abundance of clean energy entrepreneurs, but no national strategy to provide them with consistent support. Instead, there is a patchwork of policies, often varying by state and of uncertain duration. As a result, U.S. clean energy companies face ambiguity and repeated cycles of boom and bust, making it exceedingly difficult to establish a solid foundation from which they can grow.

People don’t plan to fail—they fail to plan. This old maxim about success is just as applicable to nations. Faced with the lack of a comprehensive U.S. strategy to support clean energy, many U.S. companies are looking overseas for more favorable conditions to support their growth—many are even looking to China.

Wyatt C. King is a Director at the Albright Stonebridge Group, an international strategy firm based in Washington, D.C.