Rising Tigers, Sleeping Giant II

In 2009 the Information Technology and Innovation Foundation (ITIF) and the Breakthrough Institute collaborated to produce a report titled “Rising Tigers, Sleeping Giant,” which benchmarked the clean energy competitiveness of China, Japan, South Korea, and the United States and emphasized the importance of innovation as a driver of economic competitiveness. This follow-up report examines the competitive economic position of those same four nations in the global clean energy technology sector as of 2015. It focuses on three low-carbon energy generation technologies—solar, wind, and nuclear power—exploring competitiveness in these industries as measured by research, development, and demonstration (RD&D), and new infrastructure deployment. It also discusses policy conclusions for the United States, including reasons why the United States cannot count on current public policies and private incentives to address climate change and remain competitive.

The international energy landscape has changed considerably since 2009. Large stimulus packages following the Great Recession gave way to significant adjustments in public and private RD&D and investment, with austerity measures in the United States and large reallocations in Japan out of the nuclear sector. Japan, a longstanding U.S. rival in cutting-edge technologies, and Korea are both ramping up clean technology RD&D investment and are well-positioned to be at the forefront of new developments. The United States has maintained moderate levels of public investment in clean technology since 2010—levels that are nevertheless lower than the other three countries.

Investment by these erstwhile leaders is taking place in the context of the rising Chinese clean energy sector. Driven by strong domestic demand, low manufacturing costs, and protectionist local content requirements, China’s clean manufacturing output has surged past its competitors in nearly all metrics. Chinese companies top the list of largest solar panel producers and are making significant inroads in wind turbine production. This is not simply because China is a convenient low-cost producer of technologies developed in other nations; the Chinese government now spends more on renewable energy RD&D than any other nation.

If the United States intends to remain competitive it must eliminate a number of barriers to clean energy investment and adoption. Increased public R&D funding is the best hope to achieve cost reductions that can render clean energy price competitive with fossil fuels. Private markets do not adequately account for knowledge spillovers from new technology and thus undervalue RD&D, nor are they often able to take on the long-term risks necessary to develop breakthrough technologies. Private markets are also shaped by decades of public investment in existing infrastructure and subsidies for fossil fuels. Strengthened public investment is needed to turn the tide toward clean energy and keep the United States competitive in clean energy markets going forward.