Report: US Re-takes Lead In Clean Energy Race from China... But Not For Long
Tom Konrad CFA
According to the just-released report "Who's Winning the Clean
Energy Race?" from the Pew Charitable Trusts, the United States
invested the most in Clean Energy of any country in 2011, retaking
the lead from China, which had held the top sport for the last two
years. But the US's resurgence is more likely to be a blip
than a trend.
The United States' investments in Clean Energy were up 42% in
2011 over 2010, reaching $48.1 Billion. Meanwhile, Chinese
investments were basically flat at $45.5 Billion.
The US maintains a firm lead in venture capital invested in Clean
Energy, accounting for 70% of the total $8.6 billion invested, but
while that is vital for Clean Energy technology to progress, it is
not very significant in terms of total investments, or profits
from those investments.
Venture capital investments typically fund technology development, while pubic market investments, asset finance, and debt finance fund manufacturing scale-up and infrastructure investment. Later stages of investment are typically much larger, because they need to be large enough to fund the returns to early stage investors and still reap returns for themselves. Similarly, while the returns to early stage investors can be spectacular in terms of percentage, what matters to a country's economy is the absolute size of returns, which require large investments, typically in Clean Energy Infrastructure, such as wind and solar farms.
Current Boom and Coming Collapse
While the US still
dominates technology development and venture investment, our
inconsistent and fading support for clean energy has allowed China
to take the lead for the last two years.
Ironically, fading support for Clean Energy is also what allowed
the US to re-take the lead in 2011. Many developers rushed
to get projects started before the end of 2011, when a number of
Clean Energy incentives expired (see sidebar.)
Because so many initiatives expired and may not be renewed, 2011
seems likely to be America's last hurrah in the the Clean Energy
race. Unless we re-initiate significant support for clean
energy soon, Clean Energy investment and the industries and jobs
it creates are likely to head for more hospitable political
China's pause in Clean Energy investment growth was a
re-consolidation, not a sign of a peak. While the US was
cutting incentives in 2011, China was adopting new ones. Not
only did China increase a national target for solar deployment to
50 GW in 2010, but they adopted their first national feed-in
It looks like America is winning the Clean Energy race, but 2011
was just our year to be the Hare to China's Tortoise. Next
year, look for the US to take a nap along the side of the Clean
Energy racecourse, while China resumes its purposeful ramp-up of
Clean Energy investment.
This article was
first published on Forbes.com.