7
U.S.-Chinese Cooperation

U.S.-Chinese renewable energy cooperation is beneficial for several reasons. It will increase the scale of utilization (which has direct benefits in terms of avoided emissions of greenhouse gases), and it will bring down costs by accelerating the learning rates at all stages of renewables development (R&D, manufacturing, deployment, operations, and maintenance). It can also promote trust and information sharing across stakeholders in the renewable energy sectors of both countries. To date, however, cooperation has been limited and inconsistent. In this chapter, the committee reviews the history of U.S.-Chinese cooperation on energy and climate change, describes the new era of cooperation ushered in by Presidents Hu and Obama and the participation of both countries in international discussions on energy and climate, and suggests how cooperation can be significantly expanded in the coming years.

THE BASIS FOR COLLABORATION ON RENEWABLE ENERGY

As identified throughout this report, there are several reasons for China and the United States to be harnessing their renewable resources. From an international perspective, climate change presents an additional driver. Both countries have three main options for reducing their greenhouse gas (GHG) emissions in the energy sector: (1) reducing emissions from coal-based power; (2) promoting energy efficiency and conservation; and (3) developing renewables and other low-carbon sources of energy. For decades, they have cooperated in these three areas, through governmental and nongovernmental channels. However, given the scale



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7 U.S.-Chinese Cooperation U.S.-Chinese renewable energy cooperation is beneficial for several reasons. It will increase the scale of utilization (which has direct benefits in terms of avoided emissions of greenhouse gases), and it will bring down costs by accel - erating the learning rates at all stages of renewables development (R&D, manu - facturing, deployment, operations, and maintenance). It can also promote trust and information sharing across stakeholders in the renewable energy sectors of both countries. To date, however, cooperation has been limited and inconsistent. In this chapter, the committee reviews the history of U.S.-Chinese cooperation on energy and climate change, describes the new era of cooperation ushered in by Presidents Hu and Obama and the participation of both countries in interna - tional discussions on energy and climate, and suggests how cooperation can be significantly expanded in the coming years. THE BASIS FOR COLLABORATION ON RENEWABLE ENERGY As identified throughout this report, there are several reasons for China and the United States to be harnessing their renewable resources. From an interna - tional perspective, climate change presents an additional driver. Both countries have three main options for reducing their greenhouse gas (GHG) emissions in the energy sector: (1) reducing emissions from coal-based power; (2) promoting energy efficiency and conservation; and (3) developing renewables and other low- carbon sources of energy. For decades, they have cooperated in these three areas, through governmental and nongovernmental channels. However, given the scale 75

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76 ThE POWER OF RENEWAbLES of the climate challenge, there is now an additional impetus for them to continue and even enhance collaboration. Although other countries have led the way in the early development and deployment of renewable energy resources, the United States and China are poised to become the largest markets for the deployment of renewable energy in the coming years. In 2008, they became the two largest wind power markets in the world (with China outpacing the United States in capacity additions for 2009), and they are expected to remain so for years to come. Although the United States is ahead of China in solar deployment, China leads in solar PV production, and recent government signals in China have indicated a commitment to expanding the domestic use of solar technologies. Working together, the United States and China can lead the world toward a sustainable energy future. The widespread global deployment of renewable technologies, which will be crucial to reducing human-induced climate change in the future, is unlikely to happen without leadership from the world’s two largest energy economies. Both countries are working hard to expand the development and deployment of renewables, but better coordination and more collaboration could accelerate these trends. OVERVIEW OF U.S.-CHINESE COOPERATION The United States and China have a long history of bilateral cooperation on renewable energy technologies and policy, both through official government chan- nels and among universities and nongovernmental organizations. Some examples of this historical and ongoing cooperation are described below. (A more compre- hensive list of official collaborations on energy and climate change is provided in Appendix A.) Official Bilateral Cooperation In 1979, the Memorandum of Understanding (MOU) for Bilateral Energy Agreements was signed by the U.S. Department of Energy (DOE) and the Chinese State Development Planning Commission (SDPC); the MOU led to 19 coopera- tive agreements on energy, both conventional and renewable. Almost two decades later, in 1995, DOE signed bilateral agreements with: the Chinese Ministry of Agriculture on renewable energy, the State Science and Technology Commission (SSTC) on renewable energy technology development; and the State Planning Commission (SPC) to establish a plan for mapping China’s renewable energy resources and develop strategies for financing U.S. renewable energy projects in China (this agreement also involved Chinese and U.S. export-import banks). In 1995–1996, the Protocol for Cooperation in the Fields of Energy Efficiency and Renewable Energy Technology Development and Utilization was signed by DOE and various Chinese ministries. This Protocol has seven annexes: policy, rural

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77 U.S.-ChINESE COOPERATION energy (Ministry of Agriculture), large-scale wind systems (Ministry of Electric Power [MOEP]), hybrid power systems for villages, renewable energy business development (with the State Economic and Trade Commission [SETC]), geothermal energy, energy efficiency (with SPC), and hybrid-electric vehicle development. In March 1997, Vice President Gore and then-Premier Li Peng co-chaired the first session of the U.S.-China Forum on Environment and Development in Beijing. The purpose of the forum was to increase cooperation and intensify dialogue between the United States and China on issues related to sustainable develop- ment, particularly the protection of the global environment. When President Jiang visited the United States during that same year, DOE and SPC signed the Energy and Environment Cooperation Initiative, an outgrowth of the forum, designed to focus cooperative efforts on the intersection of energy and environmental science, technology, and trade. Specific target areas included urban air quality, rural electri - fication, clean energy sources, and energy efficiency. The initiative, which involved many agencies and a number of business sectors, was perhaps the first U.S.-Chinese initiative to link energy development and environmental protection. The second meeting of the forum, held in April 1999 in Washington, D.C., was co-chaired by Vice President Al Gore and then-Premier Zhu Rongji (OPS, 1999). Two key agreements came out of that meeting related to renewable energy: (1) an MOU for the establishment of a $100 Million Clean Energy Program to accelerate the deployment to China of clean U.S. technologies for energy effi - ciency, renewable energy, and pollution reduction (the deployment was facilitated by the U.S. Export-Import Bank, DOE, the China Development Bank, and SDPC); and (2) a Statement of Intent on Cleaner Air and Cleaner Energy Technology Cooperation focused on improving energy efficiency in industrial coal-fired boil - ers; clean-coal technology; high-efficiency electric motors; and grid-connected wind-generated electric power. In 2006, the U.S. Department of State initiated the Asia-Pacific Partnership on Clean Development and Climate, which included the United States, China, India, Japan, Korea, Australia, and Canada and established public-private task forces for specific sectors, including renewable energy and distributed genera - tion. Specific renewable energy projects have been announced that reportedly involve private- and public-sector participants from both the United States and China, including: a demonstration project using solar PV concentrators led by an Australian company; a technical exchange between the United States and China on PV module reliability and quality control, led by NREL and Sandia National Laboratories; a joint R&D project on fuel cells by U.S. and Chinese fuel-cell companies; a project on fuel-cell cars by China SAIC and General Motors; and an analysis of regulatory barriers to renewable energy uptake led by Australian and U.S. research organizations.1 1 See http://www.asiapacificpartnership.org/english/pr_renewable_energy.aspx .

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78 ThE POWER OF RENEWAbLES Also in 2006, the U.S.-China Strategic Economic Dialogue (SED) was founded by Vice Premier Wu Yi and U.S. Treasury Secretary Henry Paulson. Participants included several agencies, including DOE, the Environmental Pro - tection Agency (EPA), and the National Development and Reform Commission (NDRC) and Ministry of Science and Technology (MOST) in China. SED was a two-track (energy and environment), semi-annual, cabinet-level dialogue. In April 2009, SED was renamed the U.S.-China Strategic and Economic Dialogue, with the U.S. Departments of State and Treasury as co-chairs. The strategic component of SED, which was transferred to the U.S. Department of State, includes discus - sions on U.S.-Chinese cooperation on energy and climate change. During the first meeting in July 2009, Treasury Secretary Timothy F. Geithner and Secretary of State Hillary Rodham Clinton were joined by their respective Chinese co-chairs, State Councilor Dai Bingguo (for the strategic track) and Vice Premier Wang Qishan (for the economic track).2 In 2007, the MOU on Cooperation on the Development of Biofuels was signed by the U.S. Department of Agriculture (USDA) and DOE, and by NDRC in China. This MOU encourages cooperation in biomass and feedstock produc - tion and sustainability; conversion technology and engineering; bio-based product development and standards; and rural and agricultural development strategies. In 2008 the Ten-Year Energy and Environment Cooperation Framework was signed as part of the fourth SED. The signatories to the framework include DOE, the U.S. departments of the Treasury, State, and Commerce, EPA, and, from China, NDRC, State Forestry Administration, National Energy Administration, Ministry of Finance, Ministry of Environmental Protection, MOST, and Ministry of Foreign Affairs (MFA). The framework establishes five joint task forces on five functional areas: (1) clean efficiency and secure electricity production and transmission; (2) clean water; (3) clean air; (4) clean and efficient transportation; and (5) the conservation of forest and wetland ecosystems. In July 2009, the Obama administration made its first announcement on U.S.-Chinese energy cooperation in conjunction with Secretary of Energy Steven Chu’s first trip to China.3 Chinese Minister of Science and Technology Wan Gang, Chinese National Energy Administrator Zhang GuoBao, and Chu signed a proto - col announcing plans to develop a U.S.-China Clean Energy Research Center to facilitate joint R&D on clean energy by teams of scientists and engineers from the United States and China, and to serve as a clearinghouse for researchers in both countries. The center would have headquarters in both countries, and priority topics would include building energy efficiency, clean coal (including carbon cap - ture and storage [CCS]), and clean vehicles. At the July meeting, the United States and China each pledged $15 million to support initial activities. Subsequently in September 2010, DOE announced that the U.S. component of the centers on clean 2 See http://www.ustreas.go/initiaties/us-china/. 3 See http://www.energy.go/news00/7640.htm.

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7 U.S.-ChINESE COOPERATION vehicle and clean coal technologies would be led by the University of Michigan and West Virginia University, respectively.4 The U.S.-Chinese Presidential Summit in Beijing in November 2009 resulted in significant new agreements on joint energy and climate cooperation.5 First, details of the aforementioned U.S.-China Clean Energy Research Center were formally announced (OPS, 2009a). Second, the presidents of both countries announced the launch of the U.S.-China Electric Vehicles Initiative (OPS, 2009c), which will include the development of common standards, demonstration projects in more than a dozen cities, technical road mapping, and public education projects; this initiative builds on the U.S.-China Electric Vehicle Forum held in Beijing in September 2009.6 Third, the presidents announced a new U.S.-China Energy Efficiency Action Plan that includes the development of energy efficient building codes and rating systems, energy efficiency benchmarking of industrial facili - ties, training for building inspectors and energy efficiency auditors for industrial facilities, the harmonizing of test procedures and performance metrics for energy efficient consumer products, the exchange of best practices in energy efficient labeling, and the convening of a new U.S.-China Energy Efficiency Forum to be held annually, alternating between the two countries (OPS, 2009d). The presidential summit also produced a new U.S.-China Renewable Energy Partnership. According to DOE, “Both Presidents embraced a vision of wide-scale deployment of renewable energy including wind, solar and advanced bio-fuels, with a modern electric grid, and agreed to work together to make that vision possible.” In addition, “The two Presidents recognized that, given the combined market size of the United States and China, accelerated deployment of renewable energy in the two countries can significantly reduce the cost of these technologies globally” (OPS, 2009e). Funding levels for the Renewable Energy Partnership were not specified by either country. The Renewable Energy Partnership (OPS, 2009e) lists several projects, including: • Renewable energy road mapping: The United States and China will develop a road map for widespread renewable energy deployment in both countries and identify the policy and financial tools, grid infrastructure, and technology solutions required to achieve that goal. • Regional deployment solutions: As large and geographically diverse countries, renewable energy deployment requires region-specific solutions in both the United States and China. The Partnership will provide technical and analytical resources to states and regions in both countries to support wide-spread renewable energy deployment and facilitate state-to-state and region-to-region partnerships to share experience and best practices. 4 See http://www.energy.go/44.htm. 5 See http://www.energy.go/news00/8.htm. 6 See http://www.pi.energy.go/.htm and http://www.energy.go/news00/800.htm.

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80 ThE POWER OF RENEWAbLES • Grid modernization: Scaling up renewable energy production in both the United States and China will require modernizing the electrical grid with new transmission lines and smart grid technology. The Partnership will include an Advanced Grid Working Group bringing together policy- makers, regulators, industry leaders, and civil society from the United States and China to develop strategies for grid modernization in both countries. • Advanced renewable energy technology: The United States and China will collaborate in the research and development of advanced biofuels, solar, wind, and grid technologies and work together to demonstrate pre- commercial renewable energy solutions. • Public-private engagement: The Partnership will engage the private sector in promoting renewable energy and expanding bilateral trade and investment through a new U.S.-China Renewable Energy Forum that will be held annually, rotating between the two countries. The work of the Partnership will also be supported by the U.S.-China Energy Cooperation Program, a newly formed public-private partnership with leading U.S. clean energy companies. Other announcements at the November 2009 summit included an agreement on “21st Century Coal” to promote cooperation on cleaner uses of coal, including large- scale CCS demonstration projects (OPS, 2009b), the Shale Gas Initiative (OPS, 2009f), and the U.S.-China Energy Cooperation Program to leverage private-sector resources for project development work in China on a broad array of clean energy projects. Founding members include more than 20 companies and will involve collaborative projects on renewable energy, smart grid, clean transportation, green building, clean coal, combined heat and power, and energy efficiency. Nongovernmental Collaboration In addition to official government-to-government collaborations on renewable energy, there are many other projects and programs among academic and research institutions, nongovernmental organizations (NGOs), foundations, and the private sector. For example, the U.S. Energy Foundation has a Renewable Energy Pro- gram based in its China Sustainable Energy Program (CSEP) in Beijing. CSEP supports China’s renewable energy policy and has encouraged China’s electric utilities and independent power producers to purchase renewable energy to drive down costs and accelerate the widespread introduction of renewable energy technologies. CSEP also encourages the development and implementation of new renewable energy policies that establish aggressive targets for national and provin- cial renewable energy deployment, including mandatory market-share programs, public-benefits wires charges, wind concession programs, and renewable energy

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8 U.S.-ChINESE COOPERATION pricing regulations (including recent feed-in tariffs for wind). CSEP as well as many other domestic and international NGOs and stakeholders were also closely involved both in providing input during the legislative development process of the 2005 renewable energy law, and in a recent review of the renewable energy law that led to the 2009 revisions. Several nongovernmental partnerships have been established in the private sectors of both countries. These include the American Council on Renewable Energy’s U.S.-China Program, which has a goal of helping the United States and China adopt renewable energy solutions by bringing together renewable energy technology companies from both countries. Other nongovernmental forums include cooperative programs between U.S. and Chinese universities, such as the Tsinghua–MIT Low Carbon Energy Research Center; public-private partnerships, such as the U.S.-China Clean Energy Forum; and regional and local partnerships, such as the mayoral training program run by the Joint U.S.-China Collaboration on Clean Energy. The Chinese Academy of Sciences (CAS), China’s lead national academic institution in natural sciences, is a major advisory body to the government on science- and technology-related issues and a national R&D center in the natural sciences and high-technology fields. In recent years, CAS has signed several MOUs with U.S. government research institutions on clean energy, including an MOU between the CAS Institute of Electrical Engineering and NREL on the measurement and standardization of solar PV and an MOU between the CAS Energy and Power Center and the U.S. National Energy Technology Laboratory and Pacific Northwest National Laboratory (PNNL) on fossil energy, focusing on advanced gasification, syngas conversion, carbon capture, energy storage, and energy utilization. The Chinese Academy of Engineering signed an agreement on Cooperation in Engineering and Technical Sciences with the U.S. National Academy of Engi - neering in June 2008. This wide-ranging document covers several disciplines and industries and includes study visits for scientific exchanges, exploratory missions to facilitate joint research ventures, joint seminars and workshops, and the general exchange of information and research publications. BARRIERS TO COOPERATION As is apparent from the descriptions above, a good deal of cooperative activity has been initiated, or at least proposed, on all levels. Moving from governmental agreements into on-the-ground actions, backed by financial resources, has proven to be more challenging. The official governmental track, although not the only source of cooperation, is especially important, because it influences cooperation among nongovernmental actors, primarily by providing funding opportunities for cooperative activities.

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8 ThE POWER OF RENEWAbLES Political and Financial Support There is a long list of official bilateral agreements between the United States and China in the area of clean energy and climate change (see Appendix A). The agreements themselves and the officials who signed them have been well docu- mented by both governments, but information about the results of these programs are much more difficult to find. With a few exceptions, official accounts of the achievements of these programs have not been made available.7 In addition, little is known about the level of funding for each initiative, often because the MOUs or the initiatives themselves were not backed by secure funding commitments or did not have sufficient political impetus to see them through. As a result, many people have become justifiably skeptical about government agree- ments for bilateral cooperation. In extreme cases, this has led to outright mistrust or, at least, reluctance to sign on to future agreements. More U.S.-Chinese bilateral clean energy and climate change agreements were signed in 2009 than in any other year, and most of them were signed by the presidents of both countries, indicating that they had political support at the highest level. Nevertheless, the success of these agreements can only be measured by their results, which will depend on the resources provided to ensure that they are implemented successfully. As of early 2010 many details about the imple- mentation of these agreements had yet to be worked out, but it was apparent that funding remains a serious limitation. For example, the agreements outlining the new China-U.S. Clean Energy Center and Renewable Energy Partnership refer to existing funding sources for implementing domestic actions in both countries, rather than to additional funding sources for collaborative projects. If no new resources are allocated for these agreements, it is unclear how the proposed new activities are a deviation from ongoing activities and thus able to have meaningful and transformational results. The Multilateral Context for Bilateral Discussions From a policy perspective, 2009 seems to have been a successful year for U.S.-Chinese cooperation on clean energy and climate change. The year began with the publication of many road maps by U.S. think tanks and NGOs calling for increased cooperation between the United States and China on these important issues, and8 President Obama seems to have answered the call by signing a long list of bilateral agreements during his visit to Beijing in November. 7 Examples include the “Protocol for Cooperation in the Fields of Energy Efficiency and Renewable Energy: Progress Report” conducted by DOE/MOST and published in December 1999, and follow-up assessments of DOE-supported projects for PV-wind hybrid household projects in Inner Mongolia. 8 See, e.g., Asia Society/Pew Center Roadmap for US-China Cooperation, NRDC Roadmap, PNNL Roadmap, etc.

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8 U.S.-ChINESE COOPERATION It was no coincidence that these agreements were signed in early December, just days before the start of the 15th Conference of the Parties to the United Nations Framework Convention on Climate Change and the 5th Meeting of the Parties to the Kyoto Protocol in Copenhagen, Denmark, where the United States and China, the two largest emitters of GHGs, took center stage, and the rest of the world watched to see if 194 countries could agree on an international treaty to address climate change. Although direct bilateral engagement between the United States and China does not replace the participation of both countries in a multilateral agreement, a bilateral partnership may be crucial to facilitating international talks. Bilat - eral forums provide opportunities for concrete demonstrations of commitments through joint projects and initiatives outside the UN system, which necessarily involves all 192 UN member states. Discussions on climate change, reframed as clean energy cooperation, can lead to fruitful technical discussions. But in Copenhagen, bilateral agreements appeared to have little bearing on discussions—even bilateral discussions—when many other countries were involved. Even issues that are technical in nature, such as the discussions over countries’ measurement and reporting of national greenhouse gas emissions inventories, became politically charged. The Challenge of Being Cooperative Competitors The United States and China are often referred to as “cooperative competi - tors.” Cooperation is increasingly common in many areas, from basic research to joint business ventures. At the same time, China and the United States increasingly find themselves competing for resources, talent, and economic markets. How - ever, competition can also drive innovation and low-carbon growth. So, although cooperation will be vital for clean energy development, competition will lead to further innovation and accelerate deployment. If collaborations on clean energy are carefully designed, they can improve the economic prospects of both nations without conferring an unfair competitive advantage on either of them. Recent events have shown how both countries can act cooperatively to expand access to clean energy markets. For example, announcements made in the fall of 2009 that a wind farm developer in west Texas had contracted with Shenyang Power Group, a Chinese wind turbine manufacturer, to supply its 2.5-MW tur- bines raised many concerns, particularly from members of Congress, that China was trying to compete with the United States in its own domestic market in an industry that the government had specifically been trying to promote with tax credits and other green jobs initiatives. The Texas wind farm development took place about the same time U.S. Commerce Secretary Locke had asked China to remove a long-standing policy requirement that wind turbines installed in China be locally manufactured, and China had agreed, thus potentially opening the Chinese market to U.S.-manufactured wind turbines. Likely in response to these

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84 ThE POWER OF RENEWAbLES concerns, Shenyang’s parent company, A-Power Energy Generation Systems Ltd., later announced that it would partner with the U.S. Renewable Energy Group to build a wind turbine production factory in the United States (Burnham, 2009; Pasternak, 2009; Smith, 2009).9 Goldwind, another leading Chinese wind turbine manufacturer, has also announced its intentions to manufacture wind turbines and source its components in the United States.10 Several other Chinese wind turbine companies have benefited greatly from cooperation with U.S. wind technology companies, including American Superconductor’s cooperation with leading Chi - nese firms, Sinovel and Dongfang Electric. Although concessions have been made by both sides, tensions have increased with the Section 30111 petition filed with the United States Trade Representative by the United Steelworkers (USW) in September 2010, claiming that “China’s green technology practices violate WTO rules” (USW, 2010). These increasing tensions illustrate the growing importance for both the United States and China to look for ways to jointly address the concerns of both sides so that international trade conflicts can be avoided. Both countries should have access to the best, low- est cost, wind turbine technology available, and healthy competition in domestic and international markets should encourage both countries to produce it. Clearly, it will take time to build a foundation of trust, but in the long run, that trust will be crucial to scaling up the clean energy cooperation between the United States and China that will benefit the entire world. OPPORTUNITIES FOR EXPANDING COOPERATION The focus of expanded U.S.-Chinese renewable energy cooperation should be on a few general categories: (1) basic research; (2) joint strategic studies; (3) joint R&D; (4) joint technology demonstrations; and (5) sharing of best practices in policy implementation. These categories are elaborated in the sections that follow. Specific recommendations for cooperation that fall under the categories below are presented at the end of the preceding chapters. 9 Burnham, Michael. (2009, November 17). “China’s A-Power to Build U.S. Wind Turbine Fac - tory. New York Times. [Online]. Available online at http://www.nytimes.com/gwire/00//7/ 7greenwire-chinas-a-power-to-build-us-wind-turbine-factor-74.html; Pasternack, Alex. (2009). “Chinese wind farm in Texas: Green jobs fail?” Treehugger. [Online]. Available online at http://www. treehugger.com/files/00//chinese-wind-farm-texas-green-jobs-fail.php; Smith, Rebecca. (2009, October 30). “Chinese-Made Turbines to Fill U.S. Wind Farm.” Wall Street Journal. [Online]. Avail- able online at http://online.wsj.com/article/Sb56886776475.html. 10 See http://www.prnewswire.com/news-releases/goldwind-debut-at-wind-power-00-to-herald- global-expansion-478.html. 11 Section 301 of the U.S. Trade Act of 1974, commonly referred to as Super 301, describes itself as “the principal statutory authority under which the United States may impose trade sanctions against foreign countries that maintain acts, policies and practices that violate, or deny U.S. rights or benefits under, trade agreements, or are unjustifiable, unreasonable or discriminatory and burden or restrict U.S. commerce.”

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85 U.S.-ChINESE COOPERATION Basic Research Basic research in fields that can contribute to future breakthroughs in renew - able energy technologies can be an important area of cooperation. Although there are many opportunities for cooperation in applied research, the fundamentals of many renewable energy technologies would be greatly improved with basic scientific breakthroughs. Basic research is also important for the discovery of new technologies. Solar energy conversion is one such area where collaborative research could be beneficial, given the abundance of solar resources, and the opportunities for breakthroughs in new materials and processes. Collaborative basic research can be particularly productive because there is usually less competition surrounding the sharing of intellectual property rights at this stage, because many research topics have no identified commercial value. Agreeing ahead of time to share intellectual property that results from joint research discoveries is one way to encourage innovation over competition. The U.S. national laboratories and Chinese national academies, as well as universities in both countries, are natural partners for collaborative basic research. Joint Strategic Studies Joint strategic studies can influence policy decisions in both countries. Sce - nario analyses and technology road maps in particular have been effective ways to articulate a vision and a rationale for promoting the use of renewable energy. For example, the 0 Percent by 00 study, led by DOE (2008a), has helped policy makers envision the barriers and benefits of a scenario in which the United States greatly expands the share of wind power in its energy mix. China has also con- ducted similar exercises, which can be influential if timed to fit into the planning cycle of the country’s five-year plans. NDRC’s revisions to the 2020 target for wind power capacity (from 30 GW to 100–150 GW) provide one such example. Both countries could benefit from understanding all of the strategic studies being developed, because they are both facing similar technical and political challenges related to the increased deployment of renewable energy technologies. Joint Research and Development A good deal of discussion has been stimulated about joint R&D on advanced renewable energy technologies. Although huge benefits could accrue to both countries from participating in such a venture, the perceived costs could be huge as well. Potential benefits include access to state of the art knowledge about advanced, pre-commercial renewable energy technologies developed by some of the best scientists and engineers in the world, and accelerated learning (IEA, 2010b). Potential opportunity costs would be associated with the sharing of knowl- edge, information, or even intellectual property resulting from joint R&D.

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86 ThE POWER OF RENEWAbLES The U.S.-China Clean Energy Research Center announced in November 2009 plans to sponsor joint R&D on clean energy technologies by teams of scientists and engineers from the United States and China and to serve as a clearinghouse to help researchers in both countries gain access to information. Costs will be shared equally, an arrangement that both countries have praised and that may become a precedent for future cooperation. In addition, equal cost sharing is likely to make sharing knowledge and product outputs easier. Joint Technology Demonstrations Joint demonstration projects, which are often very costly, can provide opera - tional experience for pre-commercial technologies. Cost-sharing arrangements involving multiple countries can be beneficial to all concerned, both developers and the countries in which the products will be commercialized. One clean energy technology often considered appropriate for joint demonstration is CCS applied to coal-fired power plants—a technology that would be very costly for adopters but would benefit everyone by greatly reducing harmful emissions. In the area of renewable energy, several pre-commercial solar technologies, including some concentrating solar-thermal electric and concentrating solar power (CSP), would also be appropriate for joint demonstrations. Both the United States and China could learn a great deal from further demonstrations of large-scale CSP plants. Energy storage technologies are similarly large-scale, capital-intensive projects and thus suitable candidates for joint demonstrations. Joint technology demonstrations are not included in the U.S.-Chinese cooper- ation agreements announced in late 2009. Although a joint CCS project is alluded to, no specific commitments have been made or projects announced. Sharing Best Practices in Policy Implementation The sharing of best practices in renewable energy policy making can be a fruitful area for international cooperation. Both the United States and China can benefit from the experiences of successful (and unsuccessful) policies related to the deployment of renewable energy. Too often policy mistakes that could be prevented with the sharing of information across borders are instead repeated. For example, recent underperformance of wind farms in China was the result of incentives based on installed capacity rather than on kilowatt-hours generated. This experience was reminiscent of early challenges with wind farms in California when the capacity-based tax credits offered in the early 1980s resulted in the construction of many wind farms that were never connected to the grid. It is notable that over the past 10 years, Chinese government agencies such as NDRC and NEA have transitioned from a closed decision making process to one that it is more open to direct international input. Still, as the wind incentives experience demonstrates, sharing best practices (as was done through extensive consultations

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87 U.S.-ChINESE COOPERATION with U.S. and European Union practitioners, the World Bank, and various NGOs) is not always sufficient to prevent mistakes from being repeated. There is a growing body of academic literature on renewable energy policy making. As a relatively late adopter, China has modeled its renewable energy sup- port mechanisms almost exclusively on the successful mechanisms used by other countries. Although the United States was an early leader in government support for renewable energy, support at the federal level has waned recently, and states are now taking the lead. Thus, the United States and China face similar challenges in coordinating renewable energy policies and targets across states and provinces with differing renewable resource endowments and utility structures. FINDINGS In the coming years, renewable energy will be increasingly important to both the United States and China. As two of the largest renewable energy technology markets, the decisions made by these two countries will affect the use of these technologies around the world. Therefore, U.S.-Chinese cooperation on renewable energy will be crucial, both bilaterally and internationally. Renewable energy cooperation between the United States and China should be coordinated under an overarching framework linked to a compre- hensive program of U.S.-China energy and climate cooperation agreed to by the leaders of both countries. The 2009 U.S.-Chinese clean energy cooperation agreements may provide such a framework, but it is too early to assess their achievements. The effectiveness of these agreements will ultimately depend on the commitment of both governments in ensuring they are prioritized, funded, and sustained. U.S.-Chinese renewable energy cooperation can help cultivate a more produc- tive foundation for Sino-American relations, arguably the most important bilateral relationship in the world. Because the United States and China will be two of the largest markets globally for renewable energy deployment in the coming decades, they are natural partners for addressing common challenges to expanding the deployment of renewable energy technologies. Failure to develop a sustained program of cooperation may open the door to increased tensions stemming from competition between the United States and China in these sectors, and possibly international trade disputes. The United States has as much to learn from China’s experiences with renewable energy as China has to learn from the United States’ experiences. China, which has the ability to quickly site and build projects to scale, may provide an important arena for initial deployments of renewable energy technologies that can yield lessons on policies and cost reductions that will make these technolo - gies more accessible globally. In addition, the global climate change challenge cannot be met without a successful transition to low-carbon economies by both

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88 ThE POWER OF RENEWAbLES the United States and China. Thus, U.S.-Chinese renewable energy cooperation will be crucial to addressing global climate change. Although international cooperation occurs commonly in basic research, sus - taining collaboration in applied research, development, and demonstrations has been challenging. The ongoing dialogue between the United States and China provides one framework for cooperation, but there is a pressing need for more interaction among governments, academia, and the private sector to create an environment that encourages breakthroughs and accelerates the commercialization of promising technologies. Although the mandate for cooperation should be framed at the highest levels of government, the people and organizations that will ultimately imple - ment such agreements should be drawn from the best available participants in both countries, whether they be at the central, provincial/state or local levels, and from the governmental, nongovernmental, or private sectors. Many of the most productive bilateral cooperation programs to date have involved partnerships at regional and local levels, and such cooperation should be encour- aged and nurtured by high-level mandates. Currently, bilateral research is the result of ad hoc arrangements among research institutes. A better coordinated, bilateral agenda, with a platform for setting priorities and sharing research results, would benefit the energy research enterprise in both countries. The proposed U.S.-China Clean Energy Research Center provides one such model for organizing consortia of participants from government, academia, business, and nongovernmental organizations in both countries around pressing research issues that were jointly identified by the governments of both sides. The U.S.-China Presidential Summit in Beijing in November 2009 resulted in a significant set of new agreements on joint energy and climate cooperation between the two countries, which if implemented effectively could serve as a plat- form for enhanced cooperation on renewable energy. The proposed Renewable Energy Partnership includes several project activities that could integrate many of the recommendations detailed in this report, including technology road mapping, deployment solutions, subnational partnerships, grid mod - ernization, R&D in advanced technologies, and public-private engagement. Such engagement would be most effective if a sustained public-private forum were established with a multi-year commitment for ongoing communication. In addi - tion, the forum could help facilitate new partnerships by coordinating participants from both sides and act as a clearinghouse for project information and funding or investment opportunities. Important areas for cooperation that are not included in existing partnerships and should be the topic of future cooperation include joint technology develop - ment and demonstration efforts for advanced renewable energy technologies. Subnational cooperation should be further developed, based on resource pro - files, allowing states/provinces in both countries to work together in advancing work

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8 U.S.-ChINESE COOPERATION their renewable energy goals (examples include Colorado-Qinghai and Hawaii- examples Hainan). In addition, the development of a personnel exchange program, through ). In personnel , government-sponsored fellowships that would involve short visits of U.S. and that Chinese researchers and grid and power plant operators to each other’s countries, would foster organizational learning in the fields of renewable power develop - ment and grid integration and help to promote understanding and trust in the years to come.. RECOMMENDATIONS • To ensure that existing Chinese-U.S. partnerships are utilized most effec - tively, a stable stream of funding must be committed to their support. Activities should build upon existing cooperative activities between U.S. and Chinese experts and foster additional subnational cooperation on implementation issues. • The United States and China should establish a comprehensive base for official bilateral energy cooperation, including (1) basic research in fields that can contribute to future breakthroughs in renewable energy technologies; (2) joint strategic studies advising policy makers; (3) joint research and develop- ment in advanced renewable energy technologies; (4) joint demonstrations of pre-commercial technologies, and (5) sharing of best practices in policy making, regional implementation, planning, operations, and management.

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