Parsing Chinese Clean Energy "Leadership"

A new report out from The Pew Charitable Trusts says that China is now the global leader in clean energy investment. There’s some useful data in the report, which makes it worth a read, but it doesn’t support the overwrought conclusions that many have been drawing from it.

The headline fact in the report is that China invested $34.6B in “clean energy” last year, while the United States invested only $18.6B. (I put the words “clean energy” in quotes because there’s a lot of clean energy that’s actually not included in the analysis. On the supply side, nuclear isn’t there; on the demand side, Pew’s methodology pretty much eliminates all large-scale efficiency investments, since they have no way of separating them from underlying investment in buildings, industry, etc.) If you look at the breakdown, the countries are pretty even in solar, the U.S. is way ahead in biofuels, and China is much stronger in “other renewables”, which, while not defined, seems consistent with investment primarily in small hydro. But the overall difference between the two is pretty much equal to the difference in wind, which dominated clean energy investment in both countries. All of which is to say: it’s not enough to draw a trend from yet. [Update: it seems that the Chinese wind surge is, for now, unsustainable; reports say that 40% of China’s turbine production capacity has been idled.]

Wind is also a peculiar beast, since it tends to be highly localized. (The link is to a great study on the geography of the wind industry and its supply chains – highly recommended.) That means that, while there are great environmental reasons for the United States to deploy wind, it’s unlikely that massively increased U.S. investments in new onshore wind assets would put it an a hugely “stronger” position vis-à-vis China – the turbines that get installed in China will still tend to come primarily from that country. The solar business, in contrast, is much more global – my guess (but just that) is that if China was doing far more on solar than the United States was, that would more quickly translate into sustainable advantage.

My last issue – and this comes up often – is that China’s numbers will always be bigger than the United States’, since China is building out its energy system rather than replacing it. China dominates the United States in pretty much every part of basic infrastructure investment, because it’s starting from a much lower place. Analysts are going to need to develop much better tools for understanding what all the investment numbers coming out of China actually imply.