Smart Grid Arms Race? U.S., China Face Very Different Challenges

Talking about a green revolution as a competition between China and the U.S. is like putting two teams on the same field that play different games. Yet, this has been the popular spin on news that China's spending on smart grid technology will exceed that of the U.S. by $200 million. It has also been the spin on high-speed rail and the so-called "clean tech arms race."

But had this really ought to be understood as a competition? And is a fair comparison being made? The answer, according to some China experts, is no.

The rhetoric can be confusing. Over the past week, there has been an interesting combination of language from Beijing.

Chinese People's Political Consultative Conference spokesman Zhao Qizheng said this:

"The Americans need to understand that the China-U.S. relation is like a car that has two drivers instead of one. The Chinese and Americans both have wheels and brakes, so they have to discuss with each other to drive the car forward on the right track. Otherwise, the car will only spin around and stay where it is."

Zhang Guobao, head of National Energy Administration, told reporters that on energy:

"I am quite happy the U.S. has realized our competitiveness in the regard."

It is important to understand that China considers its environmental strategy as both development and a matter of national security, and that the government is responsible to its people to provide economic security, which includes national security and energy security.

China's government is also sensitive about maintaining sovereignty. That was an issue for China during the Copenhagen climate talks in December and a reason it did not want to give in to the West about externally imposed oversight of emissions reduction progress. China maintains that it can effectively track carbon emissions itself, though it will accept technical advice from the West.

Andrew Leung, a China strategy expert in London, explains that part of the misperception in the competitive dialogue comes from the "different imperatives and perceptions between China and the West. ... [China's] imperative is very different from the West's mantra about polar bears and cherishing the world for children and children's children" — China's green development is focused instead on its responsibility for development and energy security.

The world's most populous country is on pace to become its second-largest economy as early as this year, behind only the United States, yet, when divided by population, China is still quite poor, noted YiYi Lu, an expert in civil society at Chatham House. It is also heavily reliant on burning coal for power.

When it comes to greening their energy and building out smart grids, then, the U.S. and China are starting from very different positions, said ML Chan, executive director of Smart Grid Cooperative at the Joint U.S.-China Collaboration on Clean Energy.

Smart grid in particular needs to be understood in the context of existing infrastructure and the fact that building new in China will be less expensive than renovating the existing infrastructure.

"Actually, if you look at the grid structure, China's going to have an easier life than the United States," Chan said. "The United States grid is so intermeshed together, so tightly interconnected, so it's very hard to build a grid that will bring renewables from afar."

Many countries are looking to China to see how it will implement smart grid technology, but fundamentally, the technology implementation processes will be different for every country based on the renewable energy mix, the capacity of existing infrastructure to integrate ultra-high voltage, monitoring and storage technology, he said. Those countries that are starting with older infrastructure will not necessarily be able to graft the highest end of smart grid technology onto their existing infrastructure.

As far as the competitive rhetoric continues, will investors be scared off of China? Clean tech entrepreneur Alex Conrad thinks that the lure of projected profit in energy markets in the future is too large for that to happen. Tech giants IBM, Cisco and Microsoft are investing in the smart grid market there, while Chinese companies working with electric meters and control systems are also gaining attention.

"While I generally don't think the 'race' rhetoric is helpful or appropriate, I don't think this impacts investors' decision process regarding which deals to get on board with," Conrad said. "Every deal must stand on its own, and investors will have their own internal processes to determine when that threshold is met. I also think the smartest investors will look beyond the pure binary of the U.S.-China greentech sector."

Leung explains Beijing's recent statements like this:

"Friendly, healthy competition in technology and business, as in the case between countries in the West, is a good thing. But Cold War-type zero-sum games are ... mutually destructive. Whether it is a car with two drivers, a plane with a pilot and co-pilot, or a tandem bicycle, collaboration is important. Otherwise the vehicle will not just stay where it is, it will crash together with any passengers. ... Only collaboration and healthy competition in pursuit of human excellence will make the world a better place."

So what's with all the competitive rhetoric? In large part, it may be that it's just part of American culture, this need to compete because that's how Americans are motivated.

When President Barack Obama said in his State of the Union Address, "there's no reason Europe or China should have the fastest trains, or the new factories that manufacture clean energy products," the president was framing an imperative in the minds of Americans.

But a competitive frame of mind may hinder important cooperation between the United States and China on energy in the future — and efforts to bring down the world's greenhouse gas emissions, according to the NRDC.

A new report finds that while China may be leading on basic clean tech, in the future, its clean tech development may be inhibited unless countries work together. U.S. expertise on carbon capture and storage and emissions monitoring, for example, is far more advanced than China's, the report notes. Last year, the U.S. and China agreed to begin working on a Clean Energy Research Center to advance that development.

The imperative for clean tech offers a paradigm shift not only in infrastructure technology but also everything from strategic economics to international relations. The sooner countries realize this, Leung says, the sooner clean tech will "bring dividends to all."

 

See also:

Is China Still a Developing Country?

China's Smart Grid Ambitions Could Open Door to US-China Cooperation

China's Entrepreneurs Are Ready, But Is Their Government?

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