Our team was present today in the U.S. Pavilion as Secretary of Energy Steven Chu launched a new $350 million, five-year Renewables and Efficiency Deployment Initiative (Climate REDI). This initiative was spearheaded by our former NRDC colleague Rick Duke, now U.S. Deputy Assistant Secretary of Energy for Climate Policy.  As shown in more detail here, the initiative will be designed to cut the cost of existing clean technologies, such as advanced energy efficient appliances, solar home systems and LED lamps, in order to make them affordable for people without access to electricity. In addition to lowering costs, the program will focus on enforcing quality assurance mechanisms for these products and coordinating international standards, labels, information programs and incentives for high-efficiency appliances in order to dramatically scale-up market penetration worldwide. The program will receive an $85 million infusion from the U.S. which is separate from the U.S. contribution to the major climate financing package that will likely be announced later this week. It is also separate from the $150 million U.S.-China Clean Energy Research Center that was announced during President Obama’s trip to China in November.

I gave a presentation this afternoon about unlocking the potential of energy efficiency in China at an exciting side event hosted by the Alliance to Save Energy entitled From Paradox to Paradigm: The Role of Energy Efficiency in Creating Low-Carbon Economies, chaired by European Parliament Members Claude Turmes (Luxembourg) and Lena Ek (Sweden), featuring remarks from the CEOs of Rockwool International and Siemens Building Automation. (Side note: Frances Beinecke was slated to give this presentation but she was stuck in the Bella Center registration line for most of the day).  I was more than willing to pinch-hit for her on this topic, since I am also the President of the China-US Energy Efficiency Alliance. The Alliance, which was the brainchild of Environmental Entrepreneurs (E2) members Peter Liu and Bob Epstein, is a nonprofit public-private partnership dedicated to combating global climate change by promoting energy efficiency as the cleanest and least expensive energy resource in China.

Frances’ presentation astutely pointed out that energy efficiency represents over one-third of the total CO2 emission reduction potential in China, and could avoid about 2.4 billion tonnes of CO2 emissions by 2030.  Most of China’s impressive success to date in slashing its energy intensity has been focused on the industrial sector, which constitutes about two-thirds of its energy demand. But the only way for China to achieve its new carbon intensity target will be to focus aggressively on unlocking the energy efficiency potential in China’s buildings.

In NRDC’s joint report with the Boston Consulting Group, From Grey to Green: How Energy Efficient Buildings Can Help Make China’s Urbanization Sustainable, we showed that reducing energy use in all of China’s buildings by 70% (which we did in our pathbreaking Agenda 21 project, the first LEED-certified green building in China), would avoid the need to build 550 new coal-fired power plants in China each year.  But even a more modest goal – cutting energy use by half in only 5 percent of existing buildings and 60 percent of new buildings by 2015 – would be equivalent to removing all the cars from the roads in Sweden, Norway and Denmark.

Copenhagen is swarming with representatives from clean tech companies and organizations eager to take advantage of the new opportunities that an international climate agreement would unlock.  For example, I attended a reception hosted by the U.S. Business Council for Sustainable Energy and spoke to a number of people interested in collaborating on clean tech projects in China, including Katherine Hamilton, President of the GridWise Alliance, and Jared Blum, President of the Polyisocyanurate Insulate Manufacturers Association. A group of 200 Chinese companies and organizations also issued a joint statement in Copenhagen supporting China’s new carbon intensity target and vowing to explore models of low carbon economic growth (see my colleague Jingjing Qian’s blog here).

Over the last several years, China has taken dramatic steps to grow its clean energy industry, in part because it recognizes that climate change and energy security pose significant threats to China’s own economic and social stability. It is using a number of smart policy tools to foster the growth of renewable energy, including targets, subsidies and feed-in tariffs (we hear that a national solar feed-in tariff of 1.15 RMB/kWh will be rolled out after Copenhagen).  As a result, China has been steadily improving its ranking on clean tech development.  According to Ernst & Young’s latest report on global renewable energy, China has moved ahead of Germany to become one of the top two most attractive locations in the world in which to invest in renewable energy projects, second only to the United States. 

Tom Friedman has skillfully chronicled the rapid growth of China’s clean tech industry and warned the US to ignore it at our peril. The best way for the US to continue its leadership role on clean tech is to enact strong climate and energy legislation. But we should also recognize that China’s efforts to promote renewable energy are serving to bring down costs worldwide and provide jobs all along the global supply chain. I discussed this with Polly Shaw, Director of External Relations at Suntech America, at last month’s US-China Green Tech Summit in Beijing.  Polly said that Suntech, a China-based company which recently opened its first solar PV manufacturing factory in Arizona, has boosted the bottom line for American polysilicon suppliers such as MEMO of Houston Texas (about 70% of the value of a panel is polysilicon), as well as American thin film production equipment manufacturer Applied Materials, not to mention producers of all the wires, cables, inverters and trackers that go into a PV panel. Seems that the solutions to climate change are becoming as global as climate change itself.

Our meeting came on the heels of a historic agreement between First Solar and China's northern province of Inner Mongolia to build the world's largest solar power plant that will eventually have 2 GW of installed capacity (nearly the capacity of the Hoover Dam) and span an area of about 25 square miles (roughly the size of Manhattan). By increasing the scale of production, First Solar can lower the overall cost of manufacturing its modules, which the company hopes will eventually make its PV cells comparable in price to dirty fossil fuels. First Solar has been able to lower the average manufacturing cost of a PV cell from 98 cents per watt in December 2008 to 87 cents per watt at the moment, and First Solar hopes it can reduce this further to 52 cents per watt by 2014.

 Despite its recent foray into the Chinese market, First Solar is at its core an America company powered by American workers and by American ingenuity. First Solar was started by Harold McMaster, an Ohio glass-maker who specialized in making tempered glass for the booming industries of the 1950's: automobiles and television sets. By the mid 1980's, McMaster realized the vast untapped potential of solar power and decided to take what he already knew about glass making and use it to create what would become the world's leading thin-film solar technology. McMaster started his solar company at the University of Toledo in Ohio, and Ohio is still home to First Solar's R&D headquarters and manufacturing facility, located in Perrysburg, 8 miles south of Toledo.

 As First Solar has grown to become the world's largest manufacturer of cadmium telluride thin-film PV cells, the factory in Perrysburg has continued to expand and currently employs more than 700 people. First Solar also has manufacturing facilities in Germany and Malaysia, but by increasing the scale of its existing Ohio manufacturing facility, First Solar has been able to manufacture PV cells in Ohio at a rate comparable to its lowest-cost facility in Malaysia. Ohio Governor, Ted Strickland said at the announcement of the Ohio facility's expansion, "In making this significant investment and expansion in Toledo, First Solar is helping us to send a message to the world that Ohio is reinventing itself as the leader in the advanced energy industry."

 And First Solar is not the only solar company investing in Ohio. There are currently 115 solar firms in Ohio, employing over 6,000 people in research and manufacturing, according to the "Growing Ohio's Green Economy" report. There is an entire infrastructure that already exists in Ohio to build auto equipment, and now Ohio is taking advantage of this underutilized infrastructure to build a solar industry that will create thousands of new jobs. ABC News' Charlie Gibson recently reported on how Ohio is turning around its economy by shifting its focus from automobiles to solar energy, making it the next Silicon Valley for solar (watch the video here).

 Ohio, of course, is not the only state that will benefit from a clean energy economy. Indiana and Missouri also have enormous potential to become national leaders in clean energy development.

 So why did First Solar choose China as the site of the world's largest solar power plant instead of a location in the US? In short, there is still not enough market certainty in the US for a solar plant of this scale to be feasible due to the stop-and-go support that renewable energy has received in the US. But in order for First Solar and other renewable energy companies to increase the scale of production to eventually out-price fossil fuels there needs to be market demand and market certainty. In contrast, a solar market has thrived in Germany because of policies like feed-in tariffs that have ensured a stable market for solar projects there. And now China has taken similar measures and is poised to become the world's next largest solar market.

 Until the US institutes similar policies that encourage the development of a stable market for solar energy, companies like First Solar will continue to turn to countries like China and Germany to provide most of the demand for their products, and the US will keep missing opportunities to expand its green economy. On the flip side, if the US can pass the Clean Energy Jobs and American Power Act that is currently before the Senate, then American companies like First Solar will finally have a stable market for their solar cells in the US, where Harold McMaster developed First Solar's thin-film technology decades ago.

 Establishing a stable market in the US for First Solar's PV cells accomplishes two important objectives. First, by increasing market demand for solar cells, companies like First Solar can scale-up, produce solar cells more efficiently and eventually out-price fossil fuels. Although First Solar is continually reducing its costs, it solar cells still can't compete with the cheap price of coal and oil. As the executives from First Solar told me, they see their primary competitor at the moment as fossil fuels, not Chinese solar producers, since they are all working together in the race to make solar energy cheaper than the fossil fuels that cause climate change. Secondly, an increase in US demand for solar PV cells will lead to the creation of more green jobs in places like Perrysburg, Ohio and across the US in order to meet the growing demand for solar cells. China has realized the potential that solar and other clean energy has to create jobs and this is one of the reasons they have welcomed First Solar's project in Inner Mongolia.

 Eventually, First Solar or one of its competitors will find a way to produce PV cells in a way that is cheaper than fossil fuels, and whichever company accomplishes this feat will become the new world leader in solar. As President Obama put it during his recent visit to MIT: "The world is now engaged in a peaceful competition to determine the technologies that will power the 21st century. From China to India, from Japan to Germany, nations everywhere are racing to develop new ways to produce and use energy. The nation that wins this competition will be the nation that leads the global economy. I am convinced of that. And I want America to be that nation. It's that simple."