China, Europe Lapping the United States in the Clean Energy Race

If the United States doesn't take drastic measures to engineer new clean energy policies and investment initiatives, it will continue to take a back seat to China and Europe, which are driving the clean energy market toward a profitable future.  

Both clean energy companies and a skilled workforce are heading overseas, where government policies are creating a more welcoming and promising market for clean energy products.

Take Massachusetts-based Evergreen Solar, Inc (Nasdaq: ESLR). In 2008, it used $58 million in government aid to open a new Massachusetts factory to build silicon wafers and cells and assemble solar panels. But in November 2009, it announced the assembly of solar panels would be moved to Wuhan, China, where solar panel manufacturing will cost far less than in the United States.

Evergreen earlier this month said it would expand its European sales division to cater to the robust government incentive programs in Europe, which are encouraging businesses to adopt more renewable energy practices.

NatCore Technology Inc. in New Jersey discovered how to make solar panels thinner, making them more cost efficient to manufacture. No American companies showed interest in the technology, so it reached a deal to finish developing and producing the technology in Changsha, China

"The United States' competitive position is at risk in the emerging clean energy economy," Phyllis Cuttino, director of the Pew Environment Group's Global Warming Campaign, said in a statement. "Even in the midst of a global recession, the clean energy market has experienced impressive growth. Countries are jockeying for leadership. They know that investing in clean energy can renew manufacturing bases, and create export opportunities, jobs and businesses."

Overall 2009 global renewable energy investment came in at $162 billion. Investment only fell 6.6% from 2008 - small potatoes compared to the 19% decrease in the oil and gas industry.

Investment next year should reverse and make a huge leap forward. Global renewable energy investment expectations for 2010 are $200 billion, up 25% from last year, according to Bloomberg New Energy Finance.

It's not a passionate movement to save the earth that's behind the clean energy market; it's market competition and job creation driving the clean energy race - and the United States is losing.

Prices of renewable technologies are decreasing, making them more competitive. If climate concern isn't enough motivation to encourage use, economic and employment benefits will.

The city of Baoding, China is a perfect example. The city's pristine water quality made film production one of its top industries. But when digital cameras put an end to that era, the city needed new industries to thrive. Baoding saw an opportunity in clean energy, and now it is one of the world's largest manufacturers of solar products.

China is also enlisted Arizona-based solar panel manufacturer First Solar, Inc (Nasdaq: FSLR) to build the world's largest solar plant in the Gobi Desert.

Onshore wind energy is China's other clean energy focus: It's wind capacity doubled in each of the past four years.

China catches flack for the amount of greenhouse gases its plants release, but it has steps in place to reduce emissions while creating jobs and enjoying corporate growth.

"We may spend the next few years pushing China to do more, but will then spend all the years after that chasing them as they hurtle profitably down the road to the low-carbon transformation," said Todd Stern, the U.S. Special Envoy for Climate Change.

The Money Follows the Market

In 2009, China overtook the United States in renewable energy investments for the first time ever. China pushed $34.6 billion into renewable energy projects - mostly wind farms - while the United States only spent $18.6 billion.

Wind energy and solar power are the most popular renewables, nabbing billions of investment dollars.

Wind energy constitutes over 50% of global clean energy investment. Bloomberg New Energy Finance is expecting a 9% increase in global installations of wind turbines this year - the equivalent of 34 new nuclear power stations - with a price tag of $65 billion. That's partly because turbine prices have declined 15% over the past two years.

Still, solar energy has a smaller piece of the market than wind, and prices have sharply declined in recent years, positioning solar power for significant growth. 

Compared to other Group of 20 (G20) nations, the United States falls short in the rankings, with 0.13% of its gross domestic product (GDP) invested in clean energy products, ranking it 11th against its G20 counterparts.

Spain invested five times more as a percentage of GDP in renewable energy projects than the United States; The United Kingdom, China and Brazil invested three times as much.

So why's the money moving so swiftly in China and Europe?

Foreign governments are implementing policies to encourage clean energy market growth by punishing carbon emissions and subsidizing renewable energy usage. Instead of talking about change - like the United States - they are already changing, shifting their businesses to acknowledge a more environmentally friendly market.

And the cash is pouring in.

Companies are recognizing the need to move to where the consumer base is developing for the clean energy market - and that is not the United States.

"If you want to have the same size of company that you have today, then you need to start the shift," said Katrina Landis, chief executive of the London-based BP Plc.'s (NYSE: BP) alternative energy unit. "It means to some degree giving up what you've done for the last 100 years."

General Electric Company (NYSE: GE) last week said it would invest $453 million in wind-turbine operations in the U.K, Norway, Germany and Sweden.

"What you see going on in Europe is long-term, predictable policy around renewables," Steve Bolze, head of GE's power and water divisions, told Bloomberg.

The European Union (EU) aims to drive 20% of its produced energy from renewable resources by 2020, and has the initiatives in place to meet that goal.

The European Wind Energy Association said Europe's offshore wind industry could grow by 70% in 2010. Once completed, those projects could account for up to 10% of the EU's yearly electricity output, while decreasing carbon emissions by 200 million tons.

The U.K. government is establishing a $3 billion Green Investment Bank for promoting low-carbon energy technologies. Funds will go to developing ports that support offshore wind turbine makers. 

Another clean energy winner, Germany, offers a per-kilowatt subsidy for solar panel use. As soon as solar panels are put online, the panel users start earning money. The government pays per-kilowatt subsidies for 20 years - instead of a one-time payment like the United States. The more energy produced by the solar panels, the more money earned by the users.

Other countries have adopted feed-in tariffs, carbon-reduction targets, financial incentives for investment and energy production, and energy efficiency goals.

Meanwhile, the United States has talked a lot about needed changes, but has yet to move much through Congress.

"Our nation has a critical choice to make: pass the federal policies necessary to position us as the world leader in the large and growing global clean energy market or continue to watch as China and other countries race ahead," said Pew Environment Group's Cuttino.

Too Much Talk, Not Enough Action

While most of the country has had its eyes on healthcare reform, Senators John Kerry, D-MA, Joe Lieberman, R-SC, and Lindsey Graham, I-CT, have been outlining a climate and energy proposal.

Until now, Washington's way of handling climate change policies was to enforce cap-and-trade laws. "Cap" places limits via permits on the amount of greenhouse gas emissions allowed by companies; "trade" gives the companies a market to exchange their permits.

The cap-and-trade legislation has stalled in Congress, and is of little interest to companies because it doesn't do enough to encourage growth. The House's Waxman-Markey bill focused on cap-and-trade policies, but they will be a small part of a proposal by the Senate. 

A new energy bill has to do more than punish carbon emissions if it's going to get support; it has to create jobs. After surviving the recession and facing stagnant job growth, people want to see the country move forward and enact policies that promote employment.

The private sector will be hesitant to increase clean energy investment, until a bill creating a job market is proposed,. The government's next steps will be key in creating a U.S. market impressive enough to compete with China and Europe.

"What the U.S. needs, which Europe, China and other countries have, is a stable, long-term policy," said GE's Bolze. "Our view is that you need a federal, renewable portfolio standard, or have that as part of a clean energy bill, to really restart and move forward."

Some of the proposals being talked about in Washington include a monthly auction for carbon share bidding, and business-friendly practices to encourage fewer foreign oils and fossil fuels. 

President Barack Obama's goal is to make the United States the world's leading renewable energy exporter - but right now its businesses and employees are what's leaving the country. 

"We're very good at creating companies," John Woolard, chief executive at solar power firm BrightSource Energy, said on a conference call. "We're not doing a very good job creating markets."

Get Out in Front in the Clean Energy Race

Companies with stakes in the promising clean energy lands of China and Europe, and companies that come out with innovative designs are in the best position to collect clean energy profits.

First Solar is a huge player in the solar industry and has a patented thin-film technology sought after by many companies globally. Its patented designs will be used in its largest free-field solar power plant being constructed in Spain.

Vestas Wind Systems, a Denmark-based wind-turbine maker that trades on the Copenhagen Stock Exchange, is the world's biggest turbine manufacture and is poised to profit handsomely from Europe's growing investment in onshore and offshore wind energy projects. 

And for a more balanced play on clean energy, the Market Vectors Global Alternative Energy ETF (NYSE: GEX) includes 30 companies worldwide invested in alternative energies and related technologies.

Investments like these will will reap the rewards as the industry gets more government and private sector investment.

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