The Road to Clean Energy Leadership: Baby Steps or Bold Leaps

Pursuit of global leadership in clean energy innovation is intensifying.  A new analysis  of where clean energy technologies are being invented provides a good “gut check” of where the U.S. ranks and what other countries are doing to leapfrog forward.  And it tells a very tenuous story.

For much of the past decade, countries like Japan, China, and Germany have made significant strides in clean energy, recognizing it as central to global competitiveness, energy security, and mitigating climate change.  Using the European Union’s World Patent Statistical Database, the study found that between 2000 and 2005, twelve countries invented almost 90% of clean energy technologies.  Three of those countries – Japan, the United States, and Germany – accounted for 60% of all clean energy patents. And even since the stimulus, the number of patents granted for clean energy in the U.S. has grown. 

For the United States, this should be good news, but it’s only half the story.  The U.S. is having some successes in clean energy, but policy inaction threatens any gains made in the last decade.  Other countries like Japan, Germany, and China are quickly catching up or passing the United States for the mantle of clean energy leadership.  

But how are they doing it?

Japan (37.1% of clean energy tech patents) is using a mix of public investment and energy efficiency standards.  The popular Top Runner program sets energy efficiency standards on buildings and equipment based on the specification of the technology that achieves the lowest power usage.  So as new, efficient products are invented, the efficiency standard is set lower, creating an immediate market for new innovative products.  And for technologies like next generation nuclear reactors, smart grid development, battery storage, and zero emission building technology, the Japanese government is investing significant public dollars to support new technologies from basic science to deployment.

Germany (10% of clean energy tech patents) is using extensive public investments to develop new technologies as well as support startup companies.  Germany’s feed-in tariff mandates that utilities must buy a certain amount of clean energy.  The government then subsidizes the additional cost of buying clean energy instead of fossil fuels.  It has resulted in the rapid deployment of more mature, incremental technologies and allowed those technologies to achieve cost savings over time by learning-by-doing.  Germany has also in next generation, breakthrough innovations through direct investment in basic science and R&D.  Many, though, have pointed to Germany’s inconsistent support for clean energy innovation in lieu of more subsidies for incremental mature technologies is seen as an inhibiting factor in the development of next generation clean energy though.

The United States (11.9% of clean energy tech patents) on the other hand predominantly has used venture capital to support clean energy technology development.  But because of the deep economic downturn and the failure of policy makers to pass a national energy plan, private sector funds are drying up.  John Denniston, a venture capitalist at Kleiner Perkins stated last year that, “In 2008 the entire venture capital industry in the U.S. invested roughly $2.5 billion–that’s with a ‘b,’ not a ‘t’–billion dollars in renewable energy research.”  In 2010, venture capital investment in U.S. clean tech industry fell dramatically as most investors focused on the few, less risky late stage technologies ready for market.

And since 2005 – when the study ended – these countries haven’t rested on their laurels.  From 2009 to 2013, Japan plans to invest at least $66 billion in clean energy.  South Korea – at least $46 billion – leading to a rapid increase in inventions.  China – a whopping $397 billion, making them a leader in clean energy investment.  Through the first three quarters of 2010 China spent $13.5 billion on clean energy.  In fact, as of the end of this year, China’s clean energy dominance will have grown.

But as other countries make large and long term investments in clean energy technologies, the U.S. has taken what only can be considered a few baby steps.  By mostly increasing the budget of DOE, the U.S. invested roughly $3.5 billion per year in 2009 and 2010.  Another $3 billion came from temporary funds in the stimulus package.  In 2011, the U.S. plans to invest almost $4.5 billion in clean energy innovation, but with an austerity-focused Congress there is no telling what the final number will be.  In total, other countries are out-investing the U.S. by two, three, and even four times.  The United States early role as a top country for clean energy innovation is gradually slipping away.

The way forward is clear.  The U.S. innovation system has a robust base of entrepreneurs, researchers, and companies that have made great strides since the beginning of the decade.  But they can’t do it by themselves.  The U.S. government needs to step up and make bold leaps in investment, not baby steps.  As Denniston puts it, “There is no chance, I’ll tell you, no chance that the venture capital industry can get us there alone.”  The rest of the World seems to have figured it out.  It’s time for the U.S. to do the same.

Links to clean energy patent graphs come from the Clean Energy Patent Growth Index, produced by the CleanTech Group.

 

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About the author

Matthew Stepp is a Senior Analyst with the Information Technology and Innovation Foundation (ITIF) specializing in climate change and clean energy policy. His research interests include clean energy technology development, climate science policy development, transportation policy, and the role innovation has in economic growth.