Why China has already overtaken the U.S. in cleantech

It’s been fashionable to debate whether China will some day surpass the U.S. in clean technology. Yet, after reviewing some of the metrics that really matter, one could conclude that it already has.

At least this was my thesis in moderating a recent Haas School of Business event at U.C. Berkeley in California that explored whether China would become a green economy leader.

China has already surpassed the U.S., I argued (as reported elsewhere), and pointed to the following:

  1. IPOs: According to data we collected at the Cleantech Group, in 2009 (the last full year for which data was available as of this writing), China accounted for almost three quarters of all cleantech IPO proceeds worldwide, well ahead of the U.S., which had only 26%; and to date in 2010, the top three cleantech IPOs of the year have all been Chinese companies
  2. M&As: The top region for cleantech M&A activity in 2009 was Asia (35% of total), followed by Europe (31%) and North America (26%), according to our same research above
  3. Solar: 7 of the 10 largest solar manufacturers in the world by production volume are now Asian, #2 being China’s Suntech Power, which in 2009 surpassed even Japan’s Sharp, the longtime leader. This according to a roundup by respected photovoltaic trade pub Photon International (subscribers only; order the back issue here.)
  4. REEs: China holds a monopoly on rare earth elements (REEs), critical raw materials for wind turbines and electric motors such as those used in electric vehicles like the Tesla and hybrids like the Prius. It controls 97 percent of commercially available rare earth element supplies, and has recently begun to reduce the amount it exports (at Cleantech Group, we produced the authoritative report on the subject, précis here.)
  5. Stimulus: The amount of stimulus funding China has allocated to clean technologies, including water, waste and other non-energy cleantech infrastructure, is 4 times that of the U.S. (221 billion vs. ~60 billion)
  6. R&D: There’s been a doubling of private R&D in China in recent years; China could soon surpass the U.S. in R&D spending, according to Lund University in Sweden
  7. Speed: China is making decisions quickly, and isn’t encumbered by democratic process. This January, China announced intentions to build a 2 GW $5B concentrating solar thermal plant. In the words of Bill Gross of eSolar (by way of Tom Friedman), the company whose technology was selected, “in less time than it took the U.S. DOE to do stage 1 of an application review for a 92 MW project in New Mexico, China approved, signed and is ready to begin construction this year on a 20 times bigger project.”
  8. Nukes: If you don’t already consider nuclear a clean energy technology, you should. China is expecting to build some 50 new nuclear reactors by 2020, and is already hard at work on half of them; the rest of the world combined might build 15
  9. Investment: A recent report by Breakthrough Institute called Rising Tigers, Sleeping Giant claims China, South Korea and Japan have already collectively passed the United States in the production of virtually all clean energy technologies, and over the next few years, these countries will be expected to out-invest the United States.

If this trajectory holds, the majority of cleantech-related jobs, tax revenues and cleantech commercialization bragging rights will go to Asian, mostly Chinese, companies. The interesting question for us at Kachan & Co. is what commercial opportunities will this eventuality ultimately create for others elsewhere? How can the U.S. and other jurisdictions leverage the Chinese cleantech juggernaut?

Obviously, some companies will benefit from the establishment of joint ventures with Asian companies. And there WILL be local manufacturing jobs, especially when the rising cost of oil makes overseas shipping from Asia less cost-effective—one of the reasons China’s Suntech is setting up local U.S. manufacturing in Arizona, for example. But where are the less obvious opportunities?

We have thoughts. Contact us to discuss.

A former managing director of the Cleantech Group, Dallas Kachan is now managing partner of Kachan & Co., a cleantech research and advisory firm that does business worldwide from offices in San Francisco, Toronto and Vancouver. Its staff have been covering, publishing about and helping propel clean technology since 2006. Kachan & Co. offers cleantech research reports, consulting and other services that help accelerate its clients’ success. Details at www.kachan.com.

7 replies
  1. Steven Wolk
    Steven Wolk says:

    There is a way for the U.S. to be very competitive, and probably the most successful clean-tech company. Start charging the real cost of fossil fuels and stop subsidizing them. Then consumers will scream for alternatives, inventors will invent, and investors will plow enough money into clean energy to create a plethora of successful companies (demand and supply side pull). Some will win, some will lose, but our capitalist market will separate the winners from the losers efficiently.

  2. Robert Reive
    Robert Reive says:

    China is also making a commitment to Micro Wind Powered Generators attached to the edge of the grid, or used in off grid applications.Companies like SAWT of China have grown quite quickly in the past 2 years. America has the technology to supply this market and their own, a National FIT program for both small wind and solar would encouage the States to uniformly adopt FITS and help stimulate the investment development and advancement of small wind power located at the source of use, which makes use of the existing grid as backup and can have an immediate impact, like solar on quenching the thrust of our rising energy needs. More importantly this type of technology can be easily source for build, install and maintain locally or regionally which means jobs…

  3. Justin Blows
    Justin Blows says:

    On point 6, R&D, I don't think that dollar spend is the best metric. In fact, the quality of the R&D – measured as patent quality – is significantly less for Chinese patent applicants than US patent applicants. Have a look here :http://cleanip.com.au/2010/08/12/australian-solar-patents-are-they-up-to-scratch/Having said that, the rate of patent filings in China by the Chinese in wind and solar is amazing. Have a look here :http://cleanip.com.au/2010/04/09/wind-solar-patent-filings-in-china/Some general observations on IP in China are here :http://cleanip.com.au/2010/03/22/renewable-energy-technology-in-china-protect-and-profit/

  4. Tomas Bulka
    Tomas Bulka says:

    The US does have significant deposits of Rare Earth Metals, but the industrial base that used to produce them has eroded significantly over the past 20 years. Domestic production would come back given higher prices or shortages, but in any case we would still be playing catch-up to bring that production online.

  5. Julie K.
    Julie K. says:

    This can prove that to invest in R&D is more then important in these days. And exactly we have to make decisions quickly. Bureaucracy has no place in it. As you can see democratic process in decisions of Chinese authorities has no place. Well, I can’t quite imagine that in our conditions. Above all to build up economy and its sustainable development on clean technologies is the only way to survive. We have to learn how to decide quickly…

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