September 22, 2009
Business Group Predicts US$1 Trillion Clean Energy Market in China
The China Greentech Initiative, a partnership of more than 80 largely Western companies and organizations, released a hefty report (registration required) today projecting that China's massive government investment in its "greentech" industry will drive follow-on private sector investment that could create a national market worth up to US$1 trillion annually.
According to the report:
"Chinese government policies are positive drivers for greentech market development and...stakeholders have clear opportunities to accelerate market development..."
The report evaluates the market potential of a variety of "green" technologies including renewable energy and low carbon transportation, which are expected to be two of the largest growth sectors.
Through strong policies and financial support, the Chinese government has been a major driver of China's clean energy markets. In addition to numerous fiscal incentives and subsidies for clean energy, China's economic stimulus plan allocated 37% of its US$586 billion ($4 trillion yuan) to "greentech" sectors. China is also planning a new stimulus to invest $440 to $660 billion over 10 years focusing specifically on renewable energy.
The government's policy actions have laid a sturdy framework for the growth of clean energy markets, a gradual transition to a clean energy economy, and global leadership in clean energy technologies. The report overview cites China's success in the wind sector as an example:
"China's wind power capacity, for instance, has doubled for four consecutive years since 2005, with China now ranking fourth in the world and representing 10% of total installed capacity."
Based on recent estimates by the Global Wind Energy Council, installed capacity will double yet again by the end of the coming year, making China's the largest wind energy market in the world.
The Chinese solar market is poised for take-off as well, and reports suggest that the government will soon introduce a feed-in tariff for solar electricity. China is already the leading solar manufacturer in the world, and exports more than 95% of its solar cells, according to the report.
China is also vying for leadership, primarily with Japan, in electric vehicle production. As the New York Times reported in April, it aims to be a world leader in EV production within the next three years and plans to increase its production to 500,000 hybrid or all-electric vehicles by 2011 up from just 2,100 in 2008. The government is offering research subsidies along with planned tax credits for consumers to help make this ambitious goal a reality.
In addition to these advances, the report suggests there is plenty of room for China to expand its clean energy sector. And even though the government will continue to play a leading role in China's clean energy markets, stakeholders, including the private sector, still have significant room to speed the growth of these markets. The report outlines a variety of ways in which private companies can capitalize upon these burgeoning industries.
The Greentech report is just one more indication that there is widespread recognition of China's growing dominance in the clean energy race. In August, GE's CEO, Jeffrey Immelt and Kleiner Perkins' John Doerr penned an op-ed explaining that the lack of a sustained government commitment to clean energy in the United States is causing it to lose its competitive clean energy technology edge and that, without significant public investment in clean energy, it may cede clean energy leadership to the Chinese. Both GE and Kleiner Perkins are members of the Green Tech initiative.
Some analysts have suggested that China's massive government investment in clean energy represents a "Sputnik moment" for the United States, which has thus far made comparatively little progress in clean energy technology relative to its Asian competitors. By contrast, the U.S. is planning to invest approximately one-fifth of what China has planned to invest in clean energy technology.
A recent Center for American Progress study reveals that clean energy investments from the U.S. economic stimulus package (ARRA) and potential investment from ACES, the climate and energy legislation under congressional consideration, could drive a combined $150 billion per year in public and private investment, mainly from the private sector. But the majority of the follow-on investment would be generated by the direct public investments put forth in ARRA, a short-term plan, not the more indirect market incentives created by ACES.
By demonstrating China's many realized gains from the clean energy sector and the potential for future market growth as a result of large-scale government investment, it is particularly telling that this Greentech report is predominantly led by prominent U.S. companies. In the absence of a stable, long-term clean energy public investment strategy in the U.S., it is apparent these companies will look to China as the new center of the global clean energy industry.