New clean energy policies target U.S – China trade balance

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U.S. Senator Debbie Stabenow (D-MI) and U.S. Congressman Dave Camp (R-MI) announced the Solar Manufacturing Jobs Creation Act last week

The bi-partisan legislation will offer a tax credit to support solar manufacturing in the U.S. These tax incentives are designed to encourage U.S. companies to produce solar equipment, create green jobs and invest in a domestic clean energy economy. Senator Stabenow joined fellow Senators Robert Menendez (D-NJ) and Michael Bennet (D-CO) to introduce the legislation in the Senate. In addition, Congressman Camp will be introducing related legislation in the House later this month. The Solar Manufacturing bill will provide additional tax credits for solar equipment manufacturers that will help the U.S. compete in the global clean energy race with countries such as China, South Korea and Taiwan.

Currently, the United States is falling behind in the global market for solar technology, as other countries provide incentives to invest in solar manufacturing. According to the Solar Energy Industry Association, the U.S. produced more than 40 percent of the world’s solar photovoltaic (PV) cells a decade ago. In 2008, the U.S. produced only 5 percent of the world’s solar cells. As a result, U.S. Congressman Gabrielle Giffords (D-AZ) authored the Solar Technology Roadmap Act, which is designed to support domestic research and development (R&D) and manufacturing.

Currently, a 30 percent federal Solar Investment Tax Credit (SITC) exists for the investment in or installation of solar power technology, which was extended in the Recovery Act. Under the Solar Manufacturing Jobs Creation Act, equipment and facilities used to manufacture solar power technology would be included in the property list for the SITC. These technologies include solar cells, silicon, evacuated tubes, and flat-plate solar collectors. It has been estimated that the tax credits in this legislation will generate 315,000 new domestic green jobs.

Although China produces over 30 percent of the world’s solar photovoltaics, installed PV in China only reached a total of 140 (megawatts) MW in 2008, according to the state-owned newspaper, China Daily, accounting for less than 1 percent of the global market share. Today, however, solar PV is starting to increase its share in China’s energy portfolio due to favorable government support, decreasing solar power generation costs, and rising demand in response to emerging regulations on greenhouse gas emissions. In fact, China recently revised its 2020 target for solar power capacity from 1.8 gigawatts (GW) to 20 GW, according to a recent report by Beijing’s state-own China Daily.

In order to promote the Chinese solar market, the Government has enacted several policies to support the expanding industry, including a regional feed-in tariff (FIT) and national subsidies for solar PV installations, as similar policies in Germany and Spain facilitated their world leadership with respect to deployment in recent years.

These policies have had an impact in East China’s Jiangsu province, which is home to more than 160 Chinese PV manufacturers, including Suntech and Trina Solar. In June, the Jiangsu government approved a feed-in tariff program. As a result, the price offered for each kWh of electricity from PV solar farms, rooftop projects and building integrated photovoltaics projects built this year is US $0.31, $0.54 and $0.63, respectively, which nearly covers project costs, according to Renewable Energy World. Several leading PV manufacturers such as Suntech and Trina Solar have pursued the opportunity and developed 80-MW and 30-MW rooftop PV facilities, respectively. However, state solar incentives and expanding renewable energy portfolio standards are attracting foreign companies to manufacture solar products in the U.S as well. For instance, Suntech, who exhibited its solar products at the recent International Greenbuild Expo in Phoenix, Arizona recently announced it will be build a solar panel plant in this area in response to the state’s new solar tax credit.

The Beijing-based China Electricity Power Research Institution has stated that China would fail to meet 6.4 percent of the country’s electricity demand in 2010 and 10.7 percent in 2020. Thus, solar PV is considered a vital source to cover the missing resources.

But as the U.S. remains slow to act in setting a national renewable energy portfolio standard compared to other major countries or a cap-and-trade system to stimulate sufficient demand for solar and other forms of clean energy across the country, many domestic solar cell manufacturers recognize the increasing demand in China. For example, Evergreen Solar recently announced it will be outsourcing its solar panel assembly manufacturing line in Devens, Massachusetts to China. This statement was made years after it received $58 million in state aid and being lauded by Massachusetts Gov. Deval Patrick as a symbol of the state’s economic future. The announcement came as the company announced that it lost $167 million in the first nine months of this year. Approximately half of the 577 full-time and 230 contract employees at the Devens factory involved in panel assembly are expected to be laid off. Thus, this issue only strengthens the need for detailed national and state legislation without loopholes allowing companies to capitalize on incentives without making a long-term investment.

In order to deal with similar situations and to institute a balanced U.S.-China trade partnership, U.S. President Barack Obama and Chinese President Hu Jintao announced a comprehensive clean energy agreement between the two countries during their joint talks this week. The two Presidents revealed several new programs including a new U.S.-China Renewable Energy Partnership. Under the Partnership, the two countries will develop roadmaps for large-scale renewable energy deployment in both countries. The Partnership will also provide technical and analytical resources to states and regions in both countries to support renewable energy installations and will facilitate state-to-state and region-to-region collaborations to share experience and best practices. A new Advanced Grid Working Group will bridge U.S. and Chinese policymakers, regulators, industry leaders, and civil society to initiate strategies for grid modernization in both countries. A new U.S.-China Renewable Energy Forum will be held annually as well.

In addition, the two presidents announced the creation of a new U.S.-China Clean Energy Research Center. The Center will facilitate collaborative R&D in clean energy technologies by teams of scientists and engineers from the U.S. and China. Furthermore, this Center will be supported by public and private funding of at least $150 million over five years and be split equally between the two countries. Initial research priorities will be focused on building energy efficiency, clean coal including carbon capture and storage, and clean vehicle technology using advanced batteries and biofuels.

Similarly, a U.S.-China Energy Cooperation Program (ECP) will be established. This particular program will capitalize on private sector resources for project development work in China across a wide spectrum of clean energy projects, to the advancement of both nations. More than 22 companies are already listed as founding members of the program. The ECP will include collaborative projects on renewable energy, smart grid, clean transportation, green building, clean coal, combined heat and power, and energy efficiency.

Overall, the new U.S.-China partnership coupled with the Solar Manufacturing Jobs Creation Act will enhance America’s competitiveness in the clean energy race- not to become simply be a consumer of renewables to meet emissions standards, but a producer as well.

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