Biden Fights a New Cold War With Solar Panels

“Secretary Blinken says that America, becoming a superpower of green manufacturing, will help democracy triumph over autocracy. That is a lot to ask of a solar panel. “

ClearView Energy Partners’ Kevin Book spoke about the recent Hawk turn in cleantech rhetoric from the Biden administration. President Joe Biden – and his Secretary of State – have reformulated CO2 emissions reductions not only to save the planet, but to save US primacy on this planet. China is rightly seen as a pioneer in energy technologies of the 21st century. an autocracy that makes democracies look bad.

Appealing to the spirit of Sputnik is a way of selling voters for a billion-dollar green industrial policy. The elaboration of cleantech in a new cold war, however, also harbors risks for Biden’s climate goals.

The acceptance of the affordability and necessity of cleantech is coming just as the acceptance of globalization is stalling. The spectacular decline in the cost of renewable energy and storage technologies so far is largely due to the dominance of low-cost Chinese manufacturers. Germany’s solar boost is perhaps the best-known example. The country has exceeded its manufacturing targets, but at the expense of a domestic solar cell industry that has been decimated by lower Chinese imports. As the dollars involved in cleantech have grown over the past decade and at the same time politics has taken a sharp populist turn, trade disputes and obstacles have emerged.

Green industrial policy on the scale planned by Biden will stimulate these protectionist impulses enormously. Winning the Cold War 2.0 means getting the home win first. He is not going to revise public support for trillion dollar programs without guaranteeing that most of those dollars will be spent here. However, the resulting costs increase the risk of thwarting Biden’s ambitious emissions targets.

One way to potentially avoid this trap is to take a leaf from China yourself.

BloombergNEF and the Center for Strategic and International Studies have a joint project on cleantech trade and industrial policy (the first report can be downloaded here). With a view to China’s expansion, they identify the mutually reinforcing roles of demand and supply side politics. In other words, don’t incentivize consumers only (like Germany) or only manufacturers (build it and people may not come). China provided incentives for consumers to fuel demand for electric vehicles, which gave manufacturers confidence to use their own incentives and build capacity.

So it is important that any measures aimed at getting Americans back to work, such as: B. Domestic content requirements, or even tariffs, are associated with sustained efforts to increase demand, such as: B. Biden’s planned massive expansion of credit for electric vehicles. The former would tend to increase the cost of cleantech equipment for at least “about two to three years,” says Ethan Zindler, America director at BloombergNEF. He adds, however, that this “could be a wash in the long run if US manufacturers simultaneously increase their production”, for example lithium-ion batteries, and thus take advantage of the economies of scale currently being achieved in plants in South Korea or China. This will be set out in more detail in the next joint report with CSIS, expected later this month.

Even so, the US must choose its battles. For example, China accounts for about 60% of the input for the average solar panel. However, this is already a off-the-shelf product – and not very labor-intensive – so it doesn’t make much sense to spend billions to catch up. Wind power, where the sheer equipment favors local production, looks more promising.

The existing strength of the US in terms of automobiles – including the presence of Tesla Inc. – should also be used. While China is the world leader in the use of electric vehicles, its domestic brands are (still) mostly unknown beyond its borders. Batteries, meanwhile, still require breakthroughs that massive U.S. research capabilities can be targeted, reinforced by federal R&D funding.

Even in these more promising areas, the challenge is enormous. Nikos Tsafos, Senior Fellow at CSIS, points to the most obvious example of successful reshoring in recent US history: oil and gas exploration. Whatever fueled the shale boom, latent capacity concentrated in Texas was a prerequisite. In contrast, Cleantech doesn’t have Houston (or New York for finance, Bay Area for IT, etc.). Tsafos recently conducted an experiment asking Twitter followers to identify the clean energy industrial center in the United States. The answers were scattered everywhere, suggesting a widely distributed potential, but also a relative childhood.

Biden’s proposal may not be the Green New Deal, but it is clearly a New Deal with green characteristics. The emphasis on national renewal and the dollars earmarked for it mean that the protectionist impetus of its predecessor will continue and possibly increase in other forms. Similarly, Biden’s geopolitical playing field reflects unpleasant echoes of “energy dominance”.

This challenges the assumption that weaning our economies away from fossil fuels – particularly oil – in favor of distributed, manufactured energy technologies would take the drama out of this particular arena of international competition. While the goals are very different, measures like the Chinese Belt and Road initiative and the EU’s proposed mechanism to adjust carbon limits point to an emerging energy market that may be as confrontational as the hydrocarbon market.

If the world’s largest economy and military power takes this path, that potential expands enormously. Alongside the pressures of populism, the US is awakening to its strategic weaknesses in critical minerals for cleantech. Similarly, if less acutely, like decades ago with oil, with all of the lingering neuroses that were provoked.

While the country is more ambivalent about its alliances than it was when Moscow was its main adversary, Biden’s renewed involvement in international forums such as the Paris Agreement suggests that the green energy rivalry need not become entirely risky all-rounder. The US continues to be both a huge market and a deep pool of private finance, which is particularly abundant at the moment and which it can use to secure business. Especially since China’s emissions are almost twice those of the US, winning this particularly carbon-constrained Cold War means doing one thing differently than the last one: not just surpassing Beijing, but co-opting it.

Bloomberg

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