Block’s Indicator of Sustainable Growth

by Ray Block

For United States and China to collaborate on renewable energy is always  fraught with US politicians trying to outdo themselves, beating their chest, that it has to be made in USA.

A case in point involves the joint venture between A-Power Energy Generation Systems, a member of  the Shenyang Power Group, with two American companies, Cielo Wind Power of Austin Texas, and the US Renewable Energy Group.

The prominent US Democrat Senator, Charles Schumer of New York, is up in arms about the deal. An energy agreement to instal 240 2.5 MW wind turbines on a wind farm in west Texas to produce a total 600 MW of renewable energy at a cost of $1.5 billion is big news even in Texas, the dominant US wind state.

One of the two US companies involved, Cielo Wind Power is a wind energy specialist, having developed 1.15 GW (1,150 MW) of wind energy installations, largely in Texas. The other US firm, US Renewable Energy Group, is one of the largest US private equity groups focussed on investing in renewable energy.

The Chinese company, A-Power is one of the largest providers of distributed power generating systems in China, and although relatively new in wind turbines has a licensing agreement with the German wind  company, Fuhrlander AG and Norwin of Denmark, two long established wind turbine firms.

The US Department of Energy is making available loan guarantees authority for the rapid deployment of renewable energy projects, providing they are located in one of the fifty states, the District of Columbia, or a  US territory.

The Chinese are putting up the bulk of the funds, and this at a time when US banks are unwilling to finance renewable energy projects. Yet Senator   Schumer wants to block funds to projects, unless they use “high value components,” built in United States.

The Green Inc column of the New York Times (November 5 2009) reports a study by the Investigative Reporting Workshop at American University, finding that 84 per cent of green stimulus funding has thus far gone to foreign companies building renewable energy projects in the US.

The real problem is that American renewable energy companies are usually too small,  move  too slowly, and are often hampered by lack of funding , while Asian companies move more swiftly in this new exciting age of renewable energy development.

Reporting from China, New York Times correspondent, Michael Forsythe (November 18 2009) points to the excitement and sheer exhilaration in China, as regions seek to outdo each other in the race to develop alternative energy sources and reduce pollution.

The Breakthrough Institute and the Information Technology and Innovation Foundation in their report Rising Tigers and Sleeping Giant (November 2009) elaborate on this theme.

The speed in North Asia to become world leaders in elaborately transformed manufactures, and particularly in renewable energy, is very engaging, and yet quite worrying for the west, when compared to the much slower United States in gaining  first mover advantage in the new technologies.

The Breakthrough report says that China, South Korea and Japan will invest a total of US$509 billion in clean technology over the next five years (period through to 2013), while the US will invest $171 billion over the same period.

The Breakthrough report describes the exceptional incentives  in China at both the national, regional and local government level to develop clean technology and innovation clusters, including free land, low cost financing, tax incentives, and money for R&D.

In just over three years, Baoding in Central Hebei Province has been transformed into a second Silicon Valley, with nearly 200 renewable energy firms. The Christian Science Monitor’s Peter Ford (August 10 2009) describes the crusader Mayor Yu Qun’s determined stand to make his city a hub of renewable energy. An ancient city, but now a very modern one, proud of his “electricity valley” as the Mayor describes it.

Or take Ordos in Inner Mongolia, the centre of the most modern coal mine  in  the world. Jonathan Watts reporting for the London Guardian on the two faces of China’s coal industry (November 15 2009) says “China is trying to use science to clean up and expand coal production” at the same time.

“Dirty old steel factories are being upgraded or relocated. To rerduce smog, the low chimneys of small thermal power generators are being replaced by the towering smokestacks of more efficient supercritical plants.”

Ordos is also the location of one of the two major coal to diesel plants in China, which has pioneered a direct liquefaction technique, that cracks carbon with hydrogen extracted from water to produce clear diesel.

Ordos is also the centre of a 2GW solar photovoltaics panel array in the Mongolian desert. This is being developed by Arizona based First Solar, the largest solar company in the world, and the first one to join the Standard and Poor’s 500 index. In turn, the First Solar installations will be part of an even larger 12 GW solar project.

China’s fast moves ahead is obscuring to some extent, Japan’s many technologies in the clean energy space. Toyoto’s hybrid Prius and Honda’s hydrogen fuel cell Clarityare two prominent examples of world leadership.  Sanyo, now being acquired by Panasonic is the world’s largest rechargeable battery company, and about the third largest solar cell producer. Japan is also the centre of the exciting energy storage market.

The Chinese are providing the bulk of the finance, but Senator Schumer ants