Wyden to Chu: Clean Tech Competitiveness Is the "Challenge of Our Time...Not Clear What the Strategy Is"

Originally Posted at The Breakthrough Institute

U.S. clean tech manufacturers are losing global market share to their international competitors. What is the federal government going to do about it?

That was the question posed last week to Energy Secretary Steven Chu as he testified before the Senate Energy and Natural Resources Committee. Chu was speaking on the central role that energy research and development holds in any successful effort to mitigate climate change.

During questioning, Senator Ron Wyden (D-OR) quotes an earlier statement by Secretary Chu, calling it "the challenge of our time":

"The only question is which countries will invent, manufacture, and export clean technologies, and which countries will become dependent on foreign products?"

Unfortunately, the United States is headed in the wrong direction. According to Senator Wyden, who chairs the Senate Subcommittee on International Trade, Customs, and Global Competitiveness, "80% of clean energy investments are going to take place outside the United States, even though global trade in environmental goods has doubled just in the last few years."

The Challenge of Our Time: Senator Ron Wyden (D-OR) asked about the U.S. government strategy to boost U.S. clean tech competitiveness, but wound up with more questions than answers.

A recently published report by Senator Wyden's office shows that global exports of environmental goods (the majority of which are associated with clean energy technologies) more than doubled to $215 billion from 2004 to 2008. While U.S. exports have certainly benefited from the major expansion in worldwide demand for clean tech products, it has steadily lost international market share as other nations move more aggressively to capture competitive advantages in the burgeoning clean energy sector.

In the United States, clean tech imports have grown faster than exports, and U.S. exports have not kept up with global demand or international competitors, leading to an erosion of market share for U.S. products. By contrast, other nations, particularly China, have dramatically boosted their exports over the five-year period with China experiencing the greatest value growth in clean tech exports of any nation in the world.

Key figures from the report include:

• The United States is the largest import market of environmental goods (EG) as well as the fastest growing import market from 2004-2008 in terms of product value.
• In the last five years, the U.S trade deficit in renewable energy products increased by 1,400% to nearly $5.7 billion.
• The United States faces declining export market shares in virtually every regional market, while China has substantially increased its market share in every regional market, over the last five years.

"It appears," the report concludes, "that the U.S. is not fully seizing the economic opportunities that this situation provides."

The conclusions of the Wyden study are consistent with the findings in "Rising Tigers, Sleeping Giant," a recent Breakthrough Insitute/ITIF report on international clean tech competitiveness.

Rising Tigers: The United States is losing clean tech market share as Asian government's aggressively invest in clean energy. The U.S. lacks a strategy to compete.

That report finds that China, Japan, and South Korea have already surpassed the United States in the production of virtually all clean energy technologies and will out-invest the United States by 3-1 in clean tech over the next five years. Should this investment gap persist, notes the report, "the United States will import the overwhelming majority of clean energy technologies it deploys."

The report outlines a comprehensive strategy to regain economic competitiveness in clean energy built on three pillars: research and innovation, manufacturing, and domestic market demand. Chu alluded to the latter in a response to Senator Wyden:

"You need local demand to encourage the manufacturing of these products here...if there is no local demand and it's all abroad, they will build the factory abroad."

Spurred by massive government investment, the major demand for clean tech products in countries like China compels firms in the United States to construct facilities overseas. Chinese government investment in manufacturing and deployment led Applied Materials, the world's largest producer of solar manufacturing equipment, to build its new state-of-the-art solar R&D facility in Xian, China.

However, as "Rising Tigers" makes clear, the most successful national clean energy competitiveness strategy will include strong support not just for market demand - after all, America could simply meet demand by importing more foreign-produced products. Investments in research and development and manufacturing capacity are also critical to ensure continued American technological and manufacturing leadership.

Ultimately, the back and forth between Senator Wyden and Secretary Chu left as many questions as it did answers about the U.S. government's plans to remain competitive in clean tech markets. It is revealing, though, that with the Senate considering "comprehensive climate and energy legislation," such questions about a clean energy competitiveness strategy need to be asked at all. Clearly, Senator Wyden does not see the current climate bills, which are essentially pollution reduction plans proposed by DC-based environmental groups and negotiated with incumbent energy interests, as a replacement for a real national clean tech competitiveness strategy. Under the leadership of public officials like Senator Wyden, this critical issue may soon receive the kind of public attention it deserves.

Read more!

DOE Awards $2.4 Billion to Electric Vehicle and Advanced Vehicle Battery Manufacturers

It’s been a busy past couple days for the Department of Energy.Yesterday, President Obama announced that the DOE has awarded $2.4 billion to 48 projects for manufacturing electric vehicles, vehicle batteries and components. The funding comes from the American Recovery and Reinvestment Act (ARRA) and is directed at increasing U.S. manufacturing capacity for electric vehicles and vehicle batteries. Of the $2.4 billion, the general breakdown is as follows:

• $1.5 billion in grants to U.S. based manufacturers to produce batteries and their components and to expand battery recycling capacity;
• $500 million in grants to U.S. based manufacturers to produce electric drive components for vehicles, including electric motors, power electronics, and other drive train components; and
• $400 million in grants to purchase thousands of plug-in hybrid and all-electric vehicles for test demonstrations in several dozen locations; to deploy them and evaluate their performance; to install electric charging infrastructure; and to provide education and workforce training to support the transition to advanced electric transportation systems.

Most recipients are required to match government funding, meaning this move will unleash about $2.4 billion in private investment.

“These are incredibly effective investments that will come back to us many times over – by creating jobs, reducing our dependence on foreign oil, cleaning up the air we breathe, and combating climate change,” said Energy Secretary Steven Chu. “They will help achieve the President’s goal of putting one million plug-in hybrid vehicles on the road by 2015. And, most importantly, they will launch an advanced battery industry in America and make our auto industry cleaner and more competitive.”



Michigan and Indiana, states with two of the highest rates of unemployment in the country and existing vehicle manufacturing bases, received 19 of the 48 grants. The plan is to reinvigorate the manufacturing capacity that has been decimated by the decline of the American auto industry. Additionally, because the cost of labor is such a minor part of the total cost of the vehicle batteries (10-15% according to Sarwant Singh of Frost & Sullivan), it is not likely that these jobs will be shipped overseas where labor is cheaper. Developing domestic vehicle battery production is important not only to creating jobs and improving the performance of the transportation sector, but it will keep the United States from becoming too dependent on foreign battery manufacturers (the Ford Fusion and first generation of Chevy Volts both use foreign batteries). This is one small step to keep the U.S. competitive in the clean energy race.

Check below the fold for a more detailed summary of the project grants:

• Cell, Battery, and Materials Manufacturing Facilities: 9 projects, $1,096 million
• Advanced Battery Supplier Manufacturing Facilities: 10 projects, $235 million
• Advanced Lithium-Ion Battery Recycling Facilities: 1 project, $9.5 million
• Electric Drive Component Manufacturing Facilities: 7 projects, $465 million
• Electric Drive Subcomponent Manufacturing Facilities: 3 projects, $32.3 million
• Advanced Vehicle Electrification: 4 projects, $254 million
• Transportation Sector Electrification: 1 project, $22.2 million
• Advanced Vehicle Electrification + Transportation Sector Electrification: 3 projects, $70.5 million
• Advanced Electric Drive Vehicle Education Program: 10 projects, $39.1 million

Read more!

Secretary of Energy: Breakthroughs Essential to Fully Meet Nation’s Energy Challenges

Today, the U.S. Department of Energy announced $377 million in funding to establish 46 Energy Frontier Research Centers (EFRCs) pursuing potentially path-breaking basic and translational research at the cutting-edge of clean energy innovation. Of this funding, $277 comes from the American Recovery and Reinvestment Act (ARRA, otherwise known as the stimulus package) and $100 million comes from the DOE’s FY2009 budget. The funding will be sustained over the next five years, with the DOE committing $100 million of its budget to the research centers each year.

“Meeting the challenge to reduce our dependence on imported oil and curtail greenhouse gas emissions will require significant scientific advances,” said Energy Secretary Steven Chu as he announced the new funding for EFRCs. “These centers will mobilize the enormous talents and skills of our nation’s scientific workforce in pursuit of the breakthroughs that are essential to expand the use of clean and renewable energy.”

The majority of EFRCs are based in universities, with several harnessing the skills and resources of the national laboratories, and just three awarded to non-profit organizations and private corporations. Over the course of the program, these centers will employ over 1,800 people in research into four primary realms: Renewable and Carbon-Neutral Energy (including Solar Energy Utilization, Advanced Nuclear Energy Systems, Biofuels, and Geological Sequestration of CO2); Energy Efficiency (Clean and Efficient Combustion, Solid State Lighting, Superconductivity); Energy Storage (Hydrogen Research, Electrical Energy Storage); and Crosscutting Science (Catalysis, Materials under Extreme Environments).

A few examples of the research this funding will support include (full list here):

• Columbia University will focus on achieving higher sunlight-to-electricity conversion efficiencies from thin film solar photovoltaics.
• Cornell University will focus on advanced battery chemistry and design that could enable affordable electric vehicles or mass on-grid energy storage
• University of Texas-Austin will focus on advanced materials used in energy storage technologies.
• Purdue University will focus on improved conversion of biomass to energy, fuels or chemicals.

To be sure, this funding should be celebrated – this research is crucial to developing the scientific foundation for breakthrough energy technologies. It is a great (small) step. But the time has long since come to fully invest in our nation’s innovators and the cutting-edge research essential to both improve today’s clean energy technologies and to achieve breakthroughs that pave the way for the transformational energy technologies of tomorrow. Both forms of support are necessary to make clean energy cheap.

Unfortunately, total U.S. spending on energy research, development and deployment is in a sorry state. I noted yesterday that the entire budget for ARPA-e (a newly funded government agency centered on high-risk, high-reward energy research) is less than talk show personality Rush Limbaugh’s latest contract. In total the U.S. government spent about $4 billion on energy research in 2007 (the same as the Navy’s phone bill that year by the way). That figure is thankfully up somewhat, with this new infusion of innovation investment in the stimulus and President Obama’s FY 2009 budget, but still just barely tops $5 billion. In contrast, the United States spends over $30 billion annually to pursue cures to deadly diseases and improve human health through the National Institutes of Health – evidence of the scale of a true national innovation priority.

While spending on energy research is expected to be higher this year than in recent years (in large part due to the stimulus), we need a sustained commitment to clean energy that reflects the scale of our mounting energy and climate challenge. The Waxman-Markey climate and energy bill, currently promoted as the next driver of a clean energy economy, would invest only about $1.2 billion annually in energy research and development and roughly $10 billion in the clean energy sector as a whole – less than 0.1 percent of U.S. GDP. In contrast, South Korea is investing a full 2 percent of its GDP in clean technologies, and China is planning to invest $44-66 billion annually to build their own modern clean energy industries and infrastructure. We must inspire and empower our nation’s youth to become the next generation of energy innovators by fully funding President Obama’s RE-ENERGYSE initiative, and we must build and expand upon this new funding for Energy Frontier Research Centers as just the first launching pad into the next frontiers of clean energy deployment.

Cross-posted at The Breakthrough Institute

Read more!