Will the Chinese Be the Saudis of Clean Energy?

John Elkington

January 31, 2010

Quite likely, according to today’s New York Times. “China vaulted past competitors in Denmark, Germany, Spain and the United States last year to become the world’s largest maker of wind turbines, and is poised to expand even further this year,” the paper reports. “China has also leapfrogged the West in the last two years to emerge as the world’s largest manufacturer of solar panels. And the country is pushing equally hard to build nuclear reactors and the most efficient types of coal power plants.” Great news, from a planetary and sustainability perspective, but there is a major potential downside: “These efforts to dominate renewable energy technologies raise the prospect that the West may someday trade its dependence on oil from the Mideast for a reliance on solar panels, wind turbines and other gear manufactured in China.”

“Most of the energy equipment will carry a brass plate, ‘Made in China,’ ” said K. K. Chan, the chief executive of Nature Elements Capital, a private equity fund in Beijing that focuses on renewable energy. President Obama, in last week’s State of the Union speech, “sounded an alarm that the United States was falling behind other countries, especially China, on energy. The United States and other countries are offering incentives to develop their own renewable energy industries, and Mr. Obama called for redoubling American efforts. Yet many Western and Chinese executives expect China to prevail in the energy-technology race.”

Japan’s rise a couple of decades ago spurred the West to respond, particularly in areas like total quality management (TQM), so – just maybe – we can hope that China’s rise in renewables will spur the West to take the need for a sustainable energy transition much more seriously, giving powerful long-term political signals, creating the appropriate market incentives and investing in the underlying technologies. The sheer scale of China’s export trade and potential domestic markets give it a major advantage in terms of scaling, but history suggests that there’s nothing like a profound, potentially destabilising competitive advantage to spur action in rival camps.