Critical test for Sino-US ties: Clean energy

Coauthor with Professor Dan Kammen. This post first appeared on China Daily. January 21, 2011

Clean energy cooperation will be a key litmus test of the ability of China and the United States to build a partnership based on mutual needs and opportunities. The outcome is of long-lasting global economic, environmental and geopolitical importance.

While quiet cooperation does exist between the two countries in the form of decades of joint work on energy efficiency standards and through a new but under-funded US-China Clean Energy Research Center, far higher profile actions, however, point toward conflict.

First, 2009 ended with an unproductive US-China standoff at the Copenhagen Climate Summit.

Second was China's rapid scale-up of production and global sales of renewable energy technology - specifically solar panels, wind turbines and batteries for the burgeoning electric vehicle markets.

Third are the high-level tensions over Chinese dominance in the production of rare earth metals for advanced electronics.

Taken in sum, many see these events the precursors to a "Sputnik Moment" for the US in the race for leadership in the 21st century.

However, a far more mutually profitable route exists, one that both nations and the global community need to nurture.

If necessity is the mother of invention, cooperation may be the missing father. China's incredible acceleration of production and sales of clean energy technology is the result of necessity.

China has become world's largest energy consumer, and while its coal resources are vast - 70 percent of China's energy and 80 percent of its electricity come from coal - no other nation pays as high an environmental cost for energy than does China.

China has no other path to continued growth and energy security for its 1.3 billion people than through renewable and energy efficiency.

To meet the rising demand, China invested more than $50 billion in clean energy in 2010 alone. To put this in perspective, the Chinese invested twice as much in clean energy as did the US.

The US, too, is dependent on coal, for 49 percent of electricity in 2010. Energy is the largest component of US annual imports, with crude oil accounting for only 38.4 percent of the US trade deficit in 2009.

Both nations made clean energy investment central to their recent national stimulus plans, and US President Barack Obama has many times linked economic recovery to "green jobs".

The two countries critically need each other to build the clean energy economy for the 21st century.

China is arguably the most important proving grounds for what clean energy needs most today: scale-up. China needs energy to grow and has a political system that can drive the exponential growth needed to move renewable energy to the center of the global energy system.

The US has a nimble and deep research and development system, with the "Silicon Valley Mentality" of serial innovators and entrepreneurs whose wealth creation is the envy of the world. The US also has a huge resource in its capacity for capital market and enterprise management.

Signs exist that a new model could emerge between the US and China where governments cooperate to crate an environment where companies compete to the benefit of us all.

The US company First Solar signed an agreement in May 2010 with the Ordos government in the Inner Mongolia autonomous region to develop the world's largest solar power plant, with 2 gigawatts in capacity.

Once formalized, it will allow First Solar to bring its advanced photovoltaic (PV) technology to China while leveraging its experience in large-scale PV power plants.

China's Suntech, which is setting up its first manufacturing plant in Arizona, will be able to reduce the time, cost and emissions in its manufacturing process, while creating hundreds of jobs.

The US and China need each other to use solar and wind energy in a transition away from coal. To do this they must accelerate the "Internet of renewable energy": large-scale smart grid deployment.

The US and China have the best two onshore wind energy resources on the planet, but in each case the best resources are far from major population centers.

Thus an ideal area for joint development is smart grid where advanced technology from the US joins forces with a fast-growing market in China, to deploy at scale the clean energy transmission and distribution, and storage infrastructure that makes solar and wind energy possible at utility-scale.

Indeed, the market speaks louder than the politics. Recently General Electric signed a strategic cooperation agreement with State Grid Corporation of China and the Chinese Academy of Sciences to jointly develop smart grid standards.

More such partnerships are needed.

Nuclear energy is an area where national security and clean energy come face to face.

China is building 21 gigawatts of new nuclear energy capacity. Its total nuclear capacity will reach at 70-80 gigawatts by 2020, accounting for 6 percent of its total energy use and perhaps a fifth of the global industry.

In 2007, China National Nuclear Corp partnered with Westinghouse to build four third-generation nuclear reactors for an estimated $8 billion to supply power to China's growing coastal cities.

Demand in China for advanced nuclear power technology translates into a huge market for the US companies.

The US, too, is investing heavily in nuclear energy with more than $60 billion in loan guarantees available for the industry. The most efficient form of industry support, of course, is market opportunity, and the US and China could harmonize and cooperate on transparent standards for nuclear reactor performance, safety, and secure waste management.

If there were to happen everyone would benefit.

Professor Daniel Kammen is on leave from the Energy and Resources Group at Berkeley while he serves as the Chief Technical Specialist for Renewable Energy and Energy Efficiency at the World Bank Group. Gang He is pursuing his doctorate in the Energy and Resources Group at UC Berkeley and is a guest researcher at the Institute of Environment and Economy at Peking University.

For China Daily