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Sputnik Moment: Historic Meeting Between U.S. and China May Spur a Clean Energy Race

In China, a race toward self-reliance and clean energy technology is certainly on, but the U.S. still needs to make some key changes if it wants to compete.

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Challenges to China's wind economy remain. According to Li Yan, "If one talks about the installation capacity, China will probably be number one by the end of this year or next year, but if we talk about wind energy that has been connected, then we are still far behind." While installation occurs more quickly, connecting, according to Li Yan, remains slowed by the centralized state owned energy structure, which has created a bottleneck.

Li Yan's concern pinpoints one of the potential pitfalls of the China's implementation strategies: strong policies at the central level do not always translate well into solid implementation at the regional level.

In March, China will release the 12th Five Year Plan (2011-2015), which will set new renewable energy targets. The plan calls for deep cuts in energy-intensity and large subsidies to bring renewable energy and electric vehicles to scale. It includes both a cap and trade program and carbon taxes. And it requires utilities companies meet energy-saving targets and invest electricity revenues in renewable energy. Additionally, China has announced that it will produce a nation-wide greenhouse gas inventory by 2012 -- its first since 1994. Producing such an inventory of greenhouse gases requires a sophisticated ability to measure emissions from a variety of sources.

While implementation remains a challenge, many of these targets are being met. For example, China's National Development and Reform Commission recently announced that it will meet its target of reducing total pollution by 10 percent from 2005 to 2010. Last year, the Chinese government ordered blackouts in many parts of China in order to meet another target to reduce energy intensity by 20 percent by 2010 from 2005 levels.

Thus in China, a race toward self-reliance and clean energy technology is certainly on, even if it the Sputnik Moment race itself is a U.S. construct. Chu, like China, seems to be taking the long view of the environmental and economic situation.

In the U.S., renewable energy still needs to be made cost competitive. A number of measures could help to develop and make renewable energy affordable: 1) feed-in-tariffs; 2) subsidies; 3) tax credits; and 4) state regulations provide renewable portfolio standards (RPS), that is, demand that a specific percentage of their energy, typically 4-30 percent, be derived from renewable energy sources by a specific date.

A feed-in-tariff system -- the first of these incentives -- allows homeowners, who have installed solar panels, to sell back to their utility company the excess amount of energy produced, thereby reducing their overall electric bill. As of 2009, 11 states were considering legislation to permit feed-in-tariffs in the U.S.

Subsidies in the United States often heavily favor fossil fuels. This predilection leaves renewable energy, which has been growing nonetheless, artificially gummed up in the U.S. Subsidies for renewable energy could encourage a shift in the base.

Tax credits for production of renewable energy are also extremely beneficial. Thus far, growth in wind farms has been astronomical as a result of the Recovery Act or tax credit 1603.

Michigan is second nationwide for wind manufacturing and just announced another new plant. Its success comes as a direct result of grants from the U.S. Department of Energy. Additionally, Recovery Act funds help businesses diversify into clean energy through the Clean Energy Advanced Manufacturing program. And a state law enacted by Governor Jennifer Granholm in 2008 requires 10 percent of the state's energy to come from renewable sources by 2015. Due to these subsidies and laws, the U.S. Department of Energy projects that Michigan will create 30,000 more jobs in the wind-manufacturing sector.

 
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