US Energy Secretary Steven Chu said in a recent speech at search engine giant’s Google’s headquarters that the US will need to use its "entrepreneurial spirit" in order to compete with China in the green energy race. To back up his call to action, Chu launched US$150 million in government financing for greentech projects.
Of course, in order for the US to truly claim it is making headway in the green energy race, businesses will have to stay in America, and the bad news for Chu is that leaving the US seems to be increasingly popular. Take solar manufacturer Applied Materials, for example. The US company has just opened US$250 million solar power research and demonstration center in Xi’an, which, at 400,000-square-foot, will be the largest non-governmental solar power research center in the world. Applied Materials are not alone, last month US-based First Solar announced that they will build the world’s largest solar power plant in Ordos city, Inner Mongolia, by 2019.
So what is China doing right that the US is doing wrong in terms of attracting companies to set up research and production centers in the country? While lower labor and raw material costs might play some role, Beijing’s encouragement of the use of solar power in the Middle Kingdom is undoubtably a factor. The Chinese government seem to have realized that greentech offers a lot of investment opportunities, but that subsidies are essential in making renewable energy affordable and encouraging its use.
Greentech entrepreneurs have pointed to the fact that the Chinese government recognizes the importance of renewable energy, while also trying to encourage its use and building a market for it. There is a lot of talk, as well as some policies launched by the US government in this area, but it’s mostly been the market and private companies that have driven the greentech movement there. And while the market can offer renewable energy and greentech services as long as end users find them to expensive to use then the impact of renewable energy will be limited. If the US wants to compete with China in the green energy area it’d be advised to copy Beijing’s green energy subsidy model.