Chengjie Wu

President Obama’s efforts to create a national initiative
on renewable energy encountered a major obstacle when
the U.S. Senate failed to consider a climate change bill in
July 2010. Senate Majority Leader Harry Reid, a Nevada
Democrat, said that instead of passing legislation aimed
at reducing carbon emissions, the Senate would focus on
a more specific goal of taking care of the oil spill in the
Gulf of Mexico.

The oil spill was definitely an emergency in need of great
attention at the time. But President Obama has suggested
that it is part of a larger picture that is still not being addressed. In a White House press conference he said, “More than anything else, this economic and environmental tragedy [in the Gulf of Mexico] — and it’s a tragedy —
underscores the urgent need for this nation to develop clean, renewable sources of energy.” In his view, addressing the oil spill is part of a long-term goal of developing renewable energy that will reduce environmental degradation and also create new businesses and jobs in the green energy sector.

Although renewable energy has been a topic of discussion for decades in the United States, Mr. Obama’s first real attempt to engage the United States in a discussion about legislation that would address the issue failed. In particular, his efforts to encourage investment in renewable energy failed. All this is happening — or not happening — at the same time that China is speeding up its efforts in renewable energy and moving into the position of being the world’s leader in this vital area.

Today China is the largest maker of wind turbines in the world and the second largest producer of wind power after the United States. According to Harvard and Tsinghua University researchers, China could produce enough wind power to satisfy all of its electricity demand by 2030. According to a report in China Daily, the PRC has now become the world’s largest consumer of solar energy and is the largest manufacturer of solar panels and solar water heaters in the world. And according to a report of the World Nuclear Association, China has 12 nuclear power reactors in operation as of 2010; 23 more are under construction and the construction of others is expected to start soon. Indeed, the PRC has the most aggressive nuclear power development plan in the world.

All of these recent developments raise an important question: How could China jump into the world’s lead position on renewable energy when the United States has such great economic and technological advantages?

The first point to take into consideration when considering this paradox is the rapidly growing demand for electric power in today’s China. The country’s domestic demand for electricity is rising 15 percent per year, which is nearly nine times the increase in demand for electricity in the United States. This booming market in China gives it a significant advantage when it comes to the development of renewable energy. With its huge potential market only now emerging, large investments will flow into renewable energy and boost the industry; with their huge cash reserves, Chinese banks have a very strong appetite for investing in green energy.

In contrast, given the massive investment that U.S. power companies have already made over the past several decades in fuel-based systems, it will be difficult to invest in massive new renewable energy projects. Despite the fact that renewable energy has well-known advantages over fossil fuel-based production of electricity, especially when it comes to being environmentally friendly, there are major disincentives because it is so expensive to retire existing infrastructure and replace it. In China, power companies need to buy new equipment in any event for the rapidly growing demand for energy, so renewable energy is a good choice, given its environmental advantages and increasingly competitive price.

A second major advantage that China has in the race for green energy comes from the role of government in this technical revolution. With its very powerful and centralized government, China is quite different from the United States. People in the United States may prefer democracy to such a strong central government, but the Chinese system makes it pretty straightforward to legislate new regulations or laws. As noted in sources such as the New York Times, the Chinese government has had no problem in imposing a renewable energy fee on each user of electricity in the country. This fee increases residential electricity bills by 0.25 percent to 0.4 percent; for industrial users, the fee increase is around 0.8 percent. The revenue generated from this renewable energy fee can then be used to make up the price difference between renewable energy and fossil fuel-based energy. This makes renewable energy prices competitive and therefore provides a market-based mechanism for encouraging the growth of green technology. Such a system is still needed because higher cost is the primary disadvantage of renewable energy. Compared to coal-fired production of electricity, wind energy is about 20 percent more expensive, and solar power is even more expensive than that. For these very reasons President Obama encouraged the passage of a climate change bill to make up the difference. This solution has yet to be pursued seriously in the United States, but it is already on its way to full implementation in China.

It may be a long journey for the United States to arrive at a viable renewable energy policy, given the basic fact that it will involve higher costs. But according to Mr. Obama, the United States cannot and will not give up. As he has said, “It’s time to accelerate the competition with countries like China, who have already realized the future lies in renewable energy. And it’s time to seize that future ourselves.”