THE RISE OF ASIA’S CLEANTECH ‘SILICON VALLEYS’?

According to an article on Cleantechbrief.com Asian countries are poised to outspend the United States on clean energy infrastructure and technology by a factor of three-to-one through 2013.

A new report from the Breakthrough Institute and Information Technology and Innovation Foundation Rising Tigers, Sleeping Giant states that the governments of China, Japan and South Korea will invest $519 billion in clean technology between 2009 and 2013, compared to $172 billion by the U.S. government. Climate and energy legislation, passed in the United States in June, would contribute $28.7 billion of the $172 billion five-year total. China alone will spend $440 billion to $660 billion over the next 10 years on cleantech.

The report which highlights the investment gap argues that “the United States will import the overwhelming majority of clean energy technologies it deploys.” It states that apparently 85% of U.S. President Barack Obama’s economic stimulus cleantech grants went to foreign firms suggesting the US is now lagging significantly.

Whatever your opinion on cleantech the report is important because it highlights an investment trend in longer-term research in Asia. Asian governments are taking a much more direct and coordinated approach while the US is characterised by a more “sporadic regulatory approach”.

Why is this significant? Because Asian countries by pursuing a more systematic approach are creating innovation clusters which combine universities, manufacturers, R&D labs, suppliers and other firms much like ‘the Pentagon helped create Silicon Valley in the fifties and sixties’. Ironically, these clusters will be attractive to US companies who are already making large investments in countries like China.

Private sector cleantech – China at the forefront

The success of Asia government strategy can already be seen in terms of the growth of private sector cleantech funding. Between 2000 and 2008 the US attracted $52 billion in private capital for renewable energy technologies; but China alone attracted $41 billion. However, China secured more private investment in this area than the US for the first time in 2008.

The report’s message is a big warning:

Small, indirect and uncoordinated incentives are not sufficient to outcompete Asia’s cleantech tigers…To regain economic leadership in the global clean energy industry, U.S. energy policy must include large, direct and coordinated investments in clean technology R&D, manufacturing, deployment and infrastructure.

The real question is whether there remains any belief or stomach for creating a new cleantech Silicon Valley in the US today. The short-term and increasingly risk-averse business and government culture of the past decades suggests this is not going to happen – unless fear of the East can be galvanised in a caricatured reenactment of the Cold War.

This report highlights how the shift away from longer-term thinking and the goals of pure research in the West is now being reflected in real investment and opportunity gaps. And this is just the beginning.