Why is China investing so much in U.S. Solar and Wind?

By: Yingzhen Zhao

Courtesy of World Resources Institute WRI 

 

The world’s two largest greenhouse gas emitters—the United States and China—have been forging a growing bond in combating climate change. Just last week, President Obama and President Xi made a landmark agreement to work towards reducing hydrofluorocarbons (HFCs), a potent greenhouse gas. And both the United States and China are leading global investment and development of clean energy. The United States invested $30.4 billion and added 16.9 GW of wind and solar capacity in 2012. China invested $58.4 billion and added 19.2 GW in capacity.

U.S.-China cooperation on clean energy was the topic of discussion at an event last week at the Woodrow Wilson International Center’s China Environment Forum. Experts from the World Resources Institute and the American Council on Renewable Energy (ACORE) looked at this cooperation from a seldom-discussed viewpoint –China’s renewable energy investments in the United States.

China’s Growing Overseas Investments in Renewable Energy

As new WRI analysis shows, Chinese companies have made at least 124 investments in solar and wind industries in 33 countries over the past decade (2002 – 2011). The United States is the number one destination of these investments, hosting at least eight wind projects and 24 solar projects. The majority of the investments went into solar PV power plant and wind farm development, while a few investments went into manufacturing or sales support.

Investment Drivers: The “Push-Pull” Effect

Experts from WRI and ACORE explored the various drivers behind such investments. From the China side, investments have been “pushed” out by market and industry factors, government policies, and strong financial support from the policy banks, such as the China Development Bank. Although China’s wind turbine and solar cell manufacturing industries have grown substantially, the market base for these industries is quite different. China’s solar industry relies on the international market for 95 percent of its sales, whereas its wind industry relies predominantly on the domestic market. Both industries are eyeing the United States for sustained or scaled-up market shares. Investment has proven an effective method to directly generate revenue and also create export opportunities for Chinese renewable energy companies. The Chinese government’s policies on “Strategic Emerging Industries” and “promoting healthy development of industries” call for both the solar and wind industries to grow internationally and pursue advanced technologies. Policy banks from China also actively provide funding for key companies’ overseas expansion.

The United States has also been “pulling” Chinese investments in. For example, the United States has abundant solar and wind natural resources. In windy regions, wind energy is already cost-competitive with fossil fuels. At both the federal and state level, policies exist to encourage renewable energy development. The federal Production Tax Credit is in place through the end of this year for wind power production, while the solar industry benefits from the Investment Tax Credit. At the state level, 29 states and Washington D.C. have set renewable energy portfolio targets. Although these policies don’t specifically target Chinese investors, they have served to attract many international energy investments to the United States. China is one of the major international investors.

Barriers to China’s Investment in U.S. Clean Energy

One major question arising from the recent event is the future of China’s solar and wind investments in the United States. Should the aforementioned drivers continue, they could help provide a promising future for continued investment. But barriers such as business culture differences and Chinese investors’ unfamiliarity with U.S. laws and policies are major factors to watch.

Other investment barriers include reviews of Chinese investments and rejections by the Committee on Foreign Investment in the United States (CFIUS), which Chinese investors sometimes perceive as problematic. Luckily, with early engagement and proactive compliance with U.S. policies, several major investment deals have been successfully executed recently. State-to-province cooperation is another platform where investments can be channeled. Already, California and China’s Jiangsu province have signed agreements on renewable energy cooperation.

In addition, the United States is currently experiencing close-to-flat energy demand growth. Therefore, increasing renewable energy generation capacity will need to be driven by a shift from fossil energy to renewable energy.

The Future of Clean Energy in the United States and China

The United States and China still face a lot of challenges in clean energy development, both within their own borders and with respect to their cooperation. Volatile renewable energy policies in the United States did not create an ideal enabling environment. On the other side of the Pacific, fast renewable energy development in China has caused many growing pains for the industry, such as the current inability of the electric grid to simultaneously assimilate all the installed wind power in China. Another major challenge is the trade tensions between the United States and China. For example, solar manufacturers, developers, and other stakeholders in both countries are debating the potential implications of the US-China solar panel anti-dumping cases on industry competitiveness and efforts to combat climate change. (For more examples of these trade cases, see the ChinaFAQs site.)

The United States and China recently issued a joint statement on climate change action, in which they committed to “set the kind of powerful example that can inspire the world.” More strategic cooperation and learning from each other can hopefully ease existing problems and encourage healthy development of clean energy industries in both countries.

Original text here...

India: As Deadly Floods Hit India, Kerry Calls on New Delhi to Address Climate Change

By Krista Mahr @kristamahrJune 24, 2013

It was a fitting time to talk about the weather. With some 700 dead in the massive floods that have hit the northeastern state of Uttarakhand, new torrents of rain and landslides put rescue efforts on hold on Monday. At least 10,000 people are reported to still be stranded in some of the worst monsoon flooding in years in the region, an unfolding disaster that provided a dramatic backdrop for U.S. Secretary of State John Kerry‘s two-day visit to India this week in which he called on the nation to be a more active partner in helping the U.S. battling climate change.

After expressing his condolences to the flood victims, Kerry said in a speech in New Delhi on Sunday night that the U.S. had donated $150,000 to the flood relief effort — “not the highest sum in the world,” he admitted, but “a beginning.” He went on to warn India not to dismiss the deadly intensity of the floods as a one-off tragedy. “Perhaps Mother Nature in her own way is telling us to heed some warnings,” Kerry said before a packed auditorium. “Today the science of climate change is screaming at us for action.”

(PHOTOS: Rains spark floods, landslides in northern India.): A boy sits on a ladder next to his flooded house with the rising water level of river Yamuna after heavy monsoon rains in New Delhi June 19, 2013.

How to handle global climate change mitigation has been a sore point between the nations in the past. India, one of the fastest-growing greenhouse emitters, has argued for years that developing economies should not be held to the same standards of reducing emissions as developed countries, and that the imperative to develop and reduce poverty should trump India’s committing to emissions targets. India’s emissions per capita is a fraction of that of the U.S. India and other nations have backed down from refusing all targets, they have continued to emphasize that the global strategy for addressing climate change be based on equitable growth. “I fully sympathize with the notion that India’s paramount commitment to development and eradicating poverty is essential,” Kerry said. “But we have to recognize that a collective failure to meet our collective climate challenge would inhibit all countries’ dreams of growth and development.”

This is not Kerry’s first rodeo in India. In 2008, Kerry worked the Senate to get support for then President George W. Bush and Prime Minister Manmohan Singh’s nuclear deal, which opened India’s civil nuclear facilities up to IAEA inspections and, in turn, paved the way for greater civil nuclear cooperation between the two countries. The agreement came at a time when tighter U.S.-India ties made a lot of sense to both parties in the shadow of China’s ascension on the world stage. In 2009, then Secretary of State Hillary Clinton began the India-U.S. Strategic Dialogue, an important if slightly wonky recognition of the common interests the two countries share. During his visit, Kerry continued these talks with the Prime Minister and with India’s current Minister for External Affairs Salman Khurshid.

Ahead of the visit, observers in both countries expressed concerns that the bilateral relationship has grown stagnant or hung up on disagreements over trade issues. In an article published by India Ink on Monday, Khurshid wrote that the same friction that has arisen between India and the U.S. over the climate change issue — that the same rules do not necessarily apply to countries at such different stages of economic development — applies to other areas too, alluding, perhaps, to tensions over an Indian court ruling allowing India’s pharmaceutical industry to make a generic copy of a drug patented abroad. He writes:

The challenge before us is to reconcile competing self-interests and combine them into enlightened mutual interest…We both have constraints of democracy, which are exacerbated by the different levels of development and corresponding demands of our respective economies, societies and people. For instance, India at the moment is relatively low on carbon emissions. But those will increase as we address the developmental needs of our people, unless adequately provided to adapt to low-emission technology that is obviously costly. Developing countries like India expect that the United States and other developed countries will agree to binding targets to cut emissions, having had the advantage of several centuries of development. This competing logic applies to many sectors. The solutions lie in our mutual convergence at a middle ground.

Kerry, at least when it comes to climate change, indicated that the two nations may not have the luxury of time to find that middle ground. While he said that the U.S. respects India’s prioritization of reducing poverty, he also did not give India much of a break, pointing out that the number of Indians without electricity is roughly equal to the population of the United States. Aggressively combating climate change and reducing energy poverty, he said, are interconnected. And as one of the most vulnerable countries to changing weather patterns, as the disaster in Uttarakhand has put on stark display, Kerry warned that India has a lot to lose for not taking swift action. “The worst consequences of the climate crisis,” he said, “will confront people who are the least able to be able to cope with them.”

Read original: http://world.time.com/2013/06/24/as-deadly-floods-hit-india-kerry-calls-on-new-delhi-to-address-climate-change/#ixzz2XHasNWIr

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