China vs US: The New Battle for Energy Supremacy

At his first news conference since taking office, US President Joe Biden had said in March that he would outspend China on innovation and infrastructure so that the latter’s dream of superseding the US to become the most powerful and wealthiest country would not come to fruition, at least not on “his watch.”  The President’s insinuation was that China, despite being ahead in technology, was unfit to become the world’s moral leader, a position naturally reserved for the US- the supposed champion of the liberal order- which should now reaffirm its credentials through revolutionising green-tech to win the battle against climate change. 

This characterisation is a bit ironic given America’s own recent crises of racial discrimination, assault on democracy, and domestic terrorism, which have been on clear display before the world, thanks to a still free media. Biden’s call for “an alliance of democracies” to join forces against China is thus more simply driven by self interest for the  US ambitions for energy supremacy in the garb of resisting rising authoritarianism. As tensions rise between the two countries, many are anticipating the onset of a technological cold war which would likely undo the massive suppy chains and interlinking between economies in recent years, although China did get more than its share of the benefits. Yet others are less convinced with “two camps” becoming a reality because China and the US, as influential as they are, do not subsume the whole world and other countries will deal with each of them as dictated by their self interests.  

Nevertheless, green energy’s increasing affordability and availability in recent time, will be hampered by the two nations forcing the rest of the world to choose sides in two parallel markets. For instance, low-cost Chinese manufacturers who dominate the current market, have been instrumental in decreasing the cost of renewable energy and storage techniques, thus enabling countries around the globe to expand solar capacity significantly. Should the trillion-dollar funds of the Green Industrial Policy be used to replace low-cost Chinese imports which are relied upon by the entire world to make solar modules and electric vehicle (EV) batteries? Or would funds be better invested in more promising ventures like setting up wind power plants, which depend largely on local production due to large equipment size, and research centres, which can fill important gaps in domestic technology. Cleantech appears to lack a research hub in US as of now.  

On the other hand, while China may be leading the clean energy industry today, it is having a tough time making similar progress in other technologies like semiconductors (which are, in fact, made largely by American companies), 3D printing, AI, etc. Clearly, there are additional factors, besides the oft-cited cheap labor and cheap capital (common to most Chinese industries), which make the country’s low-cost solar modules viable: Chinese energy industry’s excellence in process innovation (innovating manufacturing processes to drive down costs significantly and scale quickly) plus a prevailing low rate of product innovation in the world. In order for it to compete with China, the US needs to not only incentivise the consumption of RE in order to create more demand for it, but also take advantage of its researchers and innovators to accelerate the rate of innovation in clean energy for competitive advantage with the cost-cutting Chinese. The only good thing that one can hope the possibly impending technological Cold War to create is a spurt of innovation and efficiency.