U.S. Clean Energy Policies Risk Losing Lead Over China

The U.S. government is creating a “boom and bust” in renewable energy investment that threatens to undermine its lead over China, the Pew Charitable Trusts said in a report.

U.S. investment reached $48.1 billion in 2011, largely in wind and solar power, the Washington-based research group said last night in a report based on Bloomberg New Energy Finance data. Those funds trumped the $45.5 billion China allocated to renewables, for lead for the U.S. since 2008.

The jump to the top of the G-20 ranking followed developers’ efforts to finish projects before incentives expire. With China taking on long-term renewable energy targets and an American tax-break for wind lapsing in 2012, the U.S. again risks losing its edge, said Phyllis Cuttino, Pew’s clean energy director.

“China is sending that important policy signal which the United States is failing to do to investors,” Cuttino said in an interview. “Even though China has fallen to number two, it seems as though investment there is going to continue at a very significant level for the foreseeable future. They are going to continue to be a dynamic clean-energy hub for the world.”

The U.S. doesn’t have any comparable targets to China’s goals of installing a total of 160 gigawatts of wind power and 50 gigawatts of solar power by 2020, she said. At the same time, a production tax credit benefiting wind producers expires at the end of the year. That’s a threat to the wind industry and has prompted Vestas Wind Systems A/S (VWS), the world’s largest wind turbine maker, to say 1,600 U.S. factory jobs are at risk.

Germany, Italy

“In the absence of long-term policy, it’s hard to see how the U.S. can grow significantly in the future,” Cuttino said. “The boom-and-bust cycle of U.S. energy policy sends a very different signal to investors” from China.

U.S. President Barack Obama took office three years ago pledging to generate jobs in the wind and solar industries. Since then, carbon cap-and-trade legislation has stalled and lawmakers have attacked assistance to renewables after solar manufacturer Solyndra LLC filed for bankruptcy in September.

Globally, the installed capacity for renewable power now totals 565 gigawatts, 133 of it in China, 93 in the U.S. and 61 in Germany, according to today’s report. Cuttino said Pew had expected an increased deployment of renewables in 2011, with investment falling, and was surprised spending rose.

“This sector is like the little engine that could -- it just keep growing somewhere, somehow,” she said.

Germany ranked third for investment in clean energy in 2011, with $30.6 billion, followed by Italy on $28 billion, India on $10.2 billion and the U.K. with $9.4 billion, Pew said.

U.K. Rebound

The U.K.’s rebound followed a plunge to 13th in 2010 from fifth a year earlier. Investment in 2011 rose to $9.4 billion from $7 billion in 2010, which was revised up from an estimate of $3.3 billion reported a year ago, according to Pew. The latest number remained below the 2009 total of more than $11 billion. More than half of the investments came in solar power, as developers rushed to take advantage of subsidies that the government has now cut.

“Many businesses have brought their investments forward before the government’s cuts to support for renewable energy come into force,” Caroline Flint, spokeswoman on energy for the opposition Labour Party, said in an e-mailed statement. “The U.K. must not be allowed to fall behind.”

Ministers are “determined” to see continued growth in renewables in the U.K. and plan to pass a law reforming the electricity market that provides long term certainty for investors in low-carbon technologies, the Department for Energy and Climate Change said in an e-mailed statement.

To contact the reporter on this story: Alex Morales in London at amorales2@bloomberg.net.

To contact the editor responsible for this story: Reed Landberg at landberg@bloomberg.net.

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