US Losing Edge in the Clean Energy Sector

In 2000, the United States manufactured close to half of the world’s supply of solar cells.
US Losing Edge in the Clean Energy Sector
7/27/2010
Updated:
4/12/2012
[xtypo_dropcap]W[/xtypo_dropcap]ASHINGTON—In 2000, the United States manufactured close to half of the world’s supply of solar cells, while today its contribution to the world’s clean energy market has dwindled to around 5 percent.

According to testimony before a July U.S.-China Economic and Security Review Commission, today there are only four American companies among the top 30 global solar, wind, and advanced battery manufacturers supplying the world’s clean energy products.

“With clean energy manufacturing increasingly shifting abroad, it’s little surprise that the U.S. is running a clean energy trade deficit,” said Devon Swezey, project director at the Breakthrough Institute, before the committee.

No recent figures were provided by the hearing participants during testimony, but in 2008, the U.S. clean energy trade deficit leaped to $6 billion, increasing by 1,400 percent since 2003.

Shifting Clean Energy Investments Abroad

“What is perhaps even more concerning is that as clean energy manufacturing has shifted overseas, particularly to Asia, research and innovation activities—the area that has historically been America’s ‘comparative advantage’—have started to follow,” Swezey stated.

Swezey pointed out that the global semiconductor manufacturing giant Applied Materials Inc., based in California, is building “the world’s largest, most advanced nongovernmental solar energy research and development facility in Xian, China,” claiming that China will grow into the largest solar energy market in the future.

International Business Machines Corp., another global company with roots in the United States, is transferring more of its R&D facilities to China with an initial investment of $40 million, claiming that China’s clean energy market has the support of the Chinese government.

Other global giants, including General Motors Co., Dow Chemical Co., and Intel Corp. have already established high technology research laboratories in China.

In 2009, $34.6 billion were invested in China’s clean energy programs, almost double the $18.6 billion of investments in the United States, followed by the United Kingdom, with $11.2 billion in investments.

The money for China’s rapid expanse into the clean energy sector came from the West’s private equity funds, China’s government, its state-owned banks, and other small and large investors from throughout the world.

America needs at least $15 billion annually and a wide-ranging, targeted clean energy investment strategy. “With China and other nations moving aggressively to capture market share in the growing clean energy industry, current U.S. energy and climate policies are insufficient to keep the United States competitive,” Swezey warned.

The Chinese wind power sector has grown more than 10 times since 2006 and 130 percent between 2008 and 2009, according to Ethan Zindler, head of policy analysis at Bloomberg New Energy Finance.

Although there are a number of major Western players in the clean energy sector, “today, there is no disputing that China is number one. Last year, manufacturers there had capacity to produce solar cells for use in 4,500MW of solar modules. That represented a bit over 1/3 of the world’s overall supply,” Zindler testified.

Losing the Competitive Edge

“The reason [for the U.S. losing the competitive edge] is relatively straightforward: price.
Photovoltaic modules have become commoditized; developers, homeowners, and other buyers are simply making their decisions based on price and the Chinese firms are selling for 10–20% less than their competitors,” Zindler said.

David McCall, a district director at United Steelworkers, warned that China is not a realistic and fair competitor in any market, including the clean energy product market.

China, to get the upper hand and become the No. 1 player in the clean energy sector market, will dump underpriced, subsidized products into the market. China’s currency manipulation (despite promises that it would let its currency adjust close to realistic market prices—a promise made before and dropped as soon as the world had bought into this promise) is what allows its products to be underpriced in the world’s markets and effectively destroys its competitors.

“Foundry industry leaders are trying to figure out how China is able to sell products to U.S.-based manufacturing companies at two-thirds their price, given that they are not as efficient and have to pay the same amount for raw materials,” stated Greg Noethlich, COO at Elyria/Hodge Foundries Co., in his testimony.

What it all boils down to is that America needs to wake up if it wishes to remain competitive in the clean energy sector. Policies already developed by China and German companies, which result in demand for clean energy technologies, must be urgently developed. At the same time, significant government and private sector funding for research and development is essential to keep the sector moving and out of foreign hands.

“If the United States wants our companies to thrive in the clean energy sector, we need to get our own house in order and adopt a comprehensive package of policies that creates market demand for clean energy technologies,” testified Julian L. Wong, senior policy analyst at the Center for American Progress Action Fund.

U.S. Renewable Energy Funds Going Abroad

“By a margin of almost 4-1, foreign companies dominate the stimulus program that has distributed almost $2.2 billion since September [2009], reimbursing renewable energy developers,” according to an article on the Investigative Reporting Workshop website, a project at the American University School of Communication.

The stimulus funds come without strings attached and could result in a windfall profit to be allocated anywhere and for whatever purpose so desired by a clean energy firm. A total of $1.7 billion of the grant money went to foreign wind and geothermal companies and only $500 million to American firms.

The largest portion of the grants went to companies in the wind industry. Iberdrola S.A., a Spanish firm, received 57 percent ($546 million) of the funds, while the only U.S. company to receive grant money, First Wind, based in Boston, Mass., received just 12 percent ($115 million).

The biggest problem is that there are not enough American firms around to get a piece of the pie. In 2008, General Electric Co. and Clipper Windpower Inc. held close to 50 percent of the local market, while today they hold 17 percent less market share. The market is dominated by foreign-owned companies.

“The modern wind turbine was invented in the United States, but after several decades of neglect starting in the 1980s, the domestic industry is in shambles. There are only two homegrown American turbine manufacturers of any significance—General Electric and Clipper Wind. Both also import some parts from factories overseas,” according to the Investigative Reporting Workshop website.