[The Vector] Innovation, Growth and Competitiveness: China and the U.S.
Global renewable energy – and the clean energy race for technology, manufacturing, sales and implementation – may be one of the defining global economic issues of our century.
Where does the U.S. stack up? We know that other countries are ahead of us in development and use of renewable energy. Many countries have formalized clear energy plans with the supporting policies to ensure success and growth of the energy needs from green sources. To be competitive in producing, manufacturing, marketing and maintaining such technologies, part of the picture is being innovative and part of the picture is the ability to be competitive (which includes government policies.)
A recent report by the Information Technology and Innovation Foundation (ITIF) ranked the United States sixth out of 40 leading industrialized nations in innovation competitiveness, but dead last (40th out of 40) in the category of improvement in national innovation competitiveness over the last decade. America’s economic competitors are surging ahead while U.S. innovation capacity stagnates. The report says that criteria used to rank nations include 1) regulations and government policies that support, not retard, innovation, 2) incentives in place for firms to innovate within their own borders, and 3) an openness to high-skill immigration.
This report came on the heels of the “World Economic Forum 2010-2011 Global Competitiveness Report”, which ranks the U.S. high in innovation but places it down to 4th (from 1st place in 2008 and 2nd in 2009) for global competitiveness. For its rankings, it uses 12 pillars of competitiveness including infrastructure, macroeconomic environment, higher education in energy, goods market efficiency, business sophistication, technological readiness and financial market development.
The acclaimed report, “Rising Tigers, Sleeping Giant” from The Breakthrough Institute along with the Information Technology and Innovation Foundation (published November 2009) took a hard look at the green industry. It states that rising clean tech tigers, identified as China, Japan and South Korea, are positioning themselves with “first-mover” advantages to capture and dominate the green markets. The Chinese government spent $34.6 billion last year, more than any nation and double of what the U.S. invested into clean energy. China headquarters 6 of the largest renewable energy employers (up from 3 in 2008), says Clean Tech Job Trends 2009. The report says that China is employing some of the strategies that Japan and South Korea used to establish a technological lead in electronics and automobiles.
The important bullet points from the report include:
1) The Rising Tigers have already passed the U.S. in the production of virtually all clean energy technologies. Over the next 5 years, these nations plan to invest more than the U.S. by three to one. The public investment of these nations attracts private sector investments, which the report says equals trillions of dollars over the next decade. Asia gets the jobs, the revenues, the markets, the joint ventures, and the business. Continued focus and investment from these governments into clean energy (manufacturing, deployment, research & development, infrastructure, etc.) will give the advantage of “economies of scale” and more industry capture, while the U.S. advantages will dwindle because public investment is smaller, less focused, less direct and not long-term.
2) The report says that, the U.S. is poised to invest $172 billion over the next 5 years, while China alone is investing $397 billion. The U.S. numbers include investments in energy R&D, manufacturing and deployment in the U.S. economic recovery packages and energy bill.
3) If this intended investment gap persists, the report says, the U.S. will import the overwhelming majority of clean energy technologies it will deploy. This could jeopardize long-term competitiveness and long-term domestic economic recovery. (China has already long emerged from the recovery, relatively unscathed.)
Unlike the Asian tiger’s policies, current U.S. policies rely on modest market incentives that are viewed by the private sector as risky, indirect, not proactive, and not helpful in overcoming barriers of clean energy adoption. If there is any hope for the U.S. to compete, it must close the gap and “provide more robust support for U.S. clean tech research and innovation, manufacturing, and domestic market demand. Small, indirect and uncoordinated incentives are not sufficient to out-compete China, Japan and South Korea.” U.S. energy policies must change to include large, direct, coordinated and long-term plans and investments.
To clarify, the report states that the United States currently relies on foreign-owned companies to manufacture the majority of its wind turbines, it produces less than 10 percent of the world’s solar cells, and it is losing ground on hybrid and electric vehicle technology and manufacturing. Should this gap persist, the United States risks importing the majority of the clean energy technologies necessary to meet growing domestic demand.
