In 2009, the two countries announced cooperation on clean energy. US energy secretary, Stephen Chu, and Chinese representatives this morning signed a joint plan on the Clean Energy Research Centre. But since that first agreement two years ago, US commitment to the "green revolution" has not kept pace with China.
The New York Times reported at the weekend on the closure of Evergreen, a solar PV manufacturing plant in Devens, Massachusetts, which is moving operations to Wuhan, China. It's a familiar story across the country. Obama's green incentives for manufacturers of solar panels and wind turbines seem never enough to stem the flow of manufacturers to Asia.
Evergreen was the third largest manufacturer of PV panels in the US, and still couldn't make the numbers work with $43m of assistance from the Massachusetts government, says the NYT story.
Evergreen was selling solar panels made in Devens for $3.39 a watt at the end of 2008 and planned to cut its costs to $2 a watt by the end of last year — a target it met. But Evergreen found that by the end of the fourth quarter, it could fetch only $1.90 a watt for its Devens-made solar panels. Chinese manufacturers were selling them for as little as $1.60 a watt after reducing their costs to as little as $1.35 or less per watt.The situation is a far cry from Obama's call to make the US “the world’s leading exporter of renewable energy.” A joint venture announced in 2009 illustrated perfectly how cooperation on clean energy projects works - the $1.5 billion wind farm project in west Texas was financed largely by Chinese banks, with the help of loan guarantees and cash grants from the United States government.
And now because the banks and government in the US can't front the same sums of money that are signed off in China, Obama is running to daddy with a complaint that Beijing has violated of World Trade Organisation rules. China's subsidies to solar manufacturers are too great, claims the US.
Part of the problem is that the American economic stimulus requires projects receiving federal money to use materials from countries that have signed the WTO's government procurement agreement. China can source them anywhere - including at home.
Bloomberg New Energy Finance reported last week that new global investment in clean energy reached $243bn in 2010, up from $186.5bn in 2009. Investment in China was up 30% to $51.1bn in 2010, and doesn't look like ratcheting down its investment any time soon.
However, the US renewables industry is in good shape, a new report suggests. Barclays Capital Clean Tech Outlook 2011 says that solar demand in the US grew 111% last year, with 1,000MW of new installed capacity. Next year the outlook is even brighter, says the report, with a 125% increase, equivalent to 2,250MW.
But most of those PV panels will be manufactured in China, not the US, where installations are the real growth area.
Vishal Shah, analyst at Barclays Capital, said that federal initiatives such as the Treasury Grant Programme, the loan guarantee scheme and 30% tax incentives at federal level were having a huge impact on the US market, just at a time when Europe's subsidies begin to run out.
He told me: "In 2011, demand in northern America, US and Canada, is going to surpass demand from the German market because the incentives in the US are not coming down whereas incentives in many European countries are coming down rapidly. So we do think that there is going to be a new mixed shift towards north America for a lot of the manufacturers.
"At the federal level in the US, the 30% tax credit, that is going to be the key. And of course there are state incentives as well.
"The Treasury Grant Programme does not change the underlying project economics but it does improve the financing environment for projects. It improves the liquidity of the market. As a developer you can do more without having to wait for the tax credit at the end of the year.
"The Department of Energy loan programme is mostly for very large projects that require billions of dollars of capital investment. I don’t think that the loan programme would be suitable for a 5MW solar project because the cost of getting a loan is pretty high."
The key word here is "project" and it is noticeable by its absence in the comment from the Department of Energy in the NYT piece:
“Through our Loan Program Office we have offered conditional commitments for loan guarantees to 16 clean energy projects totaling nearly $16.5 billion. We have finalized and closed half of those loan guarantees, and the program has ramped up significantly over the last year to move projects through the process quickly and efficiently while protecting taxpayer interests.”
US incentives are geared to installed capacity, not manufacturing. Obama's complaint to the WTO now looks like a pretence at defending an industry he already considers indefensible, judging by the federal dollars on the table for companies like Evergreen. This is one battle the US president knows he has lost already.