China Leading World in Green Energy

This idea of China being ahead of the game in anything environment protection related probably strikes readers as ironic, given reports of extensive industrial pollution, such as air pollution on a scale that is changing weather patterns, large scale lead poisoning, and cadmium in the soil. As Forbes commented recently, “China: Where Poisoning People Is Almost Free.”

But we pointed out in April that China had been out for some time to take the lead in electric cars. Not only has the US fallen behind in battery technology, but we also gave up the know-how for the related drive trains:

h torque DC servomotors are the sine qua non for electric vehicles.

High torque performance is achieved via magnets made of alloys of various so called “rare earth” elements. Prominent among the alloys are samarium-cobalt and neodymium-iron-boron. GM held a majority interest in Magnaquench, an Indiana company with expertise in such materials and magnet fabrication. GM however decided that electric motors did not fit into its “core competencies.”

Ambrose Evans-Pritchard of the Telegraph tells us China is taking ground on other green energy fronts, namely solar panels and wind turbines:

China is running away with the green technology prize. It has conquered a third of the world market for solar cells and is on a breakneck course to build 100 gigawatts of wind turbines by 2020, doubling again the global capacity for wind power across vast stretches of Inner Mongolia and Xinjiang.

But potentially more important, China is on the cutting edge of price performance:

Suntech Power in Wuxi has just broken the world record for capturing photovoltaic solar energy, achieving a 15.6pc conversion rate with a commercial-grade module.

Trina Solar is neck-and-neck with America’s First Solar, the low-cost star that has already broken the cost barrier of $1 (61p) per watt with thin film based on cadmium telluride.

The Chinese trio of Suntech, Trina and Yingling all expect to be below 70 cents per watt by 2012, bringing the magical goal of “grid parity” with fossil fuels into grasp.

The concept of grid parity is subject to fierce debate, mostly revolving around which form of fuel – nuclear, oil, coal, or renewables – enjoys the biggest implicit subsidy, and what the future price of crude is likely to be. Parity has already been achieved in hot spots. First Solar’s 10-megawatt plant in Nevada can produce electricity without subsidies for 7.5 cents per kilowatt hour compared to 9 cents for fossil-based power.

But are these true technology achievements, or also a function of cheap currency? These gains are coming at the expense of European rivals, and the often often Euro-bashing (more accurately EU-bashing, but that difference is often lost) Evans-Pritchard has some sympathy:

German pioneers Solarworld and Conergy allege foul play and have called for EU sanctions, accusing Chinese rivals of practices that “border on dumping”. China’s finance ministry says it intends to cover half the investment cost of solar projects. It is a life-and-death moment for the German solar industry, pioneers who provide 75,000 jobs and once led the world. “A large number of German solar cell and solar module producers will not survive,” said UBS’s Patrick Hummel….

Roughly speaking, Chinese firms can undercut the Germans by 30pc. At root, it is a currency problem. China has stolen a march against Europe over the last five years by linking an already undervalued yuan to a weak dollar. While Beijing sheds crocodile tears about the falling greenback, it is deliberately riding dollar devaluation to protect its own export share. What is happening to German solar firms is a revealing case study of the slow-burn damage caused by currency misalignment.

If the global economy continues to be weak, advanced economies will become less tolerant of China’s continued mercantilism. Everyone knows the danger of protecionism, but if China continues to push the boundaries based on the assumption its trade partners will continue not to do much to preserve the system, it may learn to our collective detriment that it overplayed its hand.

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5 comments

  1. phouca

    Nice article, Yves. I will not buy another car that runs solely on gasoline–although I may have to lease one–simply because the long-term value of automobiles as currently configured is questionable.

    The development of cheap solar power will be a boon to mankind but hell on the financial system until it readjusts.

    BTW, it wanted to express my support for you and your blog. I read ZH as well, and I would hope that this spat will end amicably. You are one of the best at what you do and it doesn't matter a bit to me what your "real" name is and where you work. I appreciate all of the great writing and analysis you do which is available to someone like me for free.

    Don't let them get you down.

  2. Dave Raithel

    Well, now that nobody is who they say they might be – and even I'm sometimes known as "that fucking asshole" or "commie shit" or what have you moonbat loon, etc., I have to observe: Isn't this how capitalism is 'sposed to work? (China ain't been communist, if ever, in a long while, and other commentators here have made the case that China's Bolsheviks have modeled the place in Western Capitalism's Image as they perceive it.) In pursuing ITS interest, providing each of us is pursuing OUR interests, we will by that imaginary hand be slapped into equilibrium … before the ecosystem collapses, I suppose.

    Sometimes, I just feel like collateral damage waiting to happen…. Hey, did anybody manage to sell that chewing gum in China? What's his (or her) take on this?

  3. Purple

    If global climate change talks collapse, that could prove to be the catalyst for a round of tariff wars – or "carbon taxes".

  4. expat64

    "But we pointed out in April that China had been out for some time to take the lead in electric cars."

    This needs correction. It should read:

    But we failed to point out in April that Chinese children had been out for some time ingesting the lead in electric car batteries

    China green? Ha, ha, ha, ha, ha…oh, God, I can't breathe.

  5. asphaltjesus

    Yves,

    While it's nice to talk about something good going on, your post sets up a bad precedent.

    China and India in particular are pouring **tons** of greenhouse gasses into the environment and the emissions are rapidly increasing with huge numbers of coal-fired power plants coming online every month. This expansion won't stop for at least a generation.

    Cars in China are an insignificant portion of the picture.

    Here's a nice summary, http://www.bizmology.com/2009/06/17/choking-on-chinas-coal/ with an optimistic end-note, but I'm just not that optimistic. The priority in China has to be infrastructure. The environment is at the very bottom of the priority list.

    The less-sexy facts from BP: http://www.bp.com/productlanding.do?categoryId=6929&contentId=7044622

    It's an uncompromising situation. China's people deserve the same creature-comforts as do all people. But the West has created societies that cannot be sustained by all people.

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