ABOUT THE REPORT
Advantage America: The U.S.-China Clean Energy Trade Relationship was developed for public informational and educational purposes. Underlying data for this report were compiled for Pew by Bloomberg New Energy Finance, the definitive source of insight, data and news on the transformation of the energy sector. A full description of the data sources and methodology employed in the development of this report can be found in the appendices.
EXECUTIVE SUMMARY
More than half a trillion dollars’ worth of goods and services are traded by the world’s two leading economies, the United States and China. In 2011, the last year for which complete data were available for the purposes of this report, China exported $4 worth of goods and services for every $1 exported by the United States. Current trade flows reflect the reality that China is a low-cost producer and the United States a high-volume consumer of finished products. But underlying these truths is a trading relationship that is more nuanced, in which the United States has key strengths that often go unrecognized.
Clean energy is a recent contributor to the overall U.S.-China trade relationship as renewable and advanced energy systems have emerged as a global priority for economic progress, energy security, and environmental protection. It is well known that the United States and China are leaders in the global clean energy sector. But beyond overall investment and deployment data, there is a poor understanding of how the two clean energy superpowers interact in the sector.
Misunderstanding of clean energy trade realities is fed by broad-based turmoil in the marketplace resulting from intense international competitive pressures, rapid price declines, and policy uncertainty in U.S. and European markets. High-profile clean energy trade cases involving Chinese exports of photovoltaic (solar) cells and modules and wind turbine towers to the United States also amplify confusion about the nature of this trade between the two countries.
This report seeks to shed light on that relationship. Although the U.S.-China relationship in clean energy trade is still a relatively small portion of the total exchange of goods and services between them, it nevertheless is extensive. This report examines U.S.-China clean energy trade overall and the relative strengths and weaknesses of each country in the solar photovoltaic, wind, and energy smart-technology sectors.
U.S.-China trade in solar photovoltaics
In the solar photovoltaic subsector, we examined trade in polysilicon, wafers, cells, and modules, as well as other aspects of the solar value chain related to essential materials, inverters, and capital equipment that are required in the solar energy production process.
Solar energy product exports are the largest component of U.S.-China clean energy trade for both countries. Combined, firms based in the two nations traded more than $6.5 billion worth of products and services in 2011.
Finished solar modules account for 95 percent of the solar products exported by China to the United States. China also exports $151 million worth of solar cells to the United States. Both of these products reflect China’s strengths in mass assembly and high-volume manufacturing.
But China’s strength in production of solar modules is matched on the U.S. side by leadership in high-tech goods and services. The trading strength of the United States in this sector derives from competitive advantages in producing high-value inputs (polysilicon and wafers, both for making photovoltaic cells), materials used in making photovoltaic modules, and the capital equipment and systems necessary in solar factories.
All told, firms based in the United States traded more than $3.7 billion worth of goods and services with Chinese interests in the solar photovoltaic subsector, while Chinese companies exported $2.8 billion worth of products to the United States. On a net basis, the United States enjoyed a $913 million surplus in the solar sector.
U.S.-China trade in wind technologies
The wind component is the smallest of the three U.S.-China clean energy trade sectors examined in this report. Overall, more than $923 million worth of wind energy goods and services was exchanged between the two countries in 2011.
As with solar, the U.S. wind industry excels in relatively high-margin specialty materials such as fiberglass produced by large firms and sensitive electronic and other controls systems, with U.S. exports to China totaling $534.9 million. China’s largest trade contributors are wind turbine towers (a trade driven almost entirely by logistical concerns rather than pure cost advantages) and turbine rotors manufactured under a U.S.-China joint venture. China’s wind energy exports to the United States total $388.7 million.
Overall, U.S. wind energy firms have a net trade surplus of just over $146 million.
U.S.-China trade in energy smart technologies
Energy smart technologies include a suite of technologies, services, and products that help improve energy performance and efficiency, store energy, and reduce carbon emissions. For this report, U.S.-China trade was tracked in four leading energy smart technologies: smart meters; light-emitting diodes, or LEDs; advanced lithium-ion batteries; and electric vehicles.
Trade in energy smart technology constitutes the second-largest component in U.S.-China trade flows. Overall, more than $1.1 billion worth of equipment is traded.
China leads in smart metering and lithium-ion batteries, with trade to the United States valued at more than $120 million. In addition, China exports $133 million worth of LED products, primarily fixtures, to the United States. Although each country exports chips, modules, and fixtures to the other, U.S. firms exported more than $800 million worth of LED capital equipment to China while importing none. The United States also traded $29 million worth of lithium-ion batteries in 2011.
In total, the United States had a net trade surplus of $571 million in the energy smart technology sector in 2011.
Conclusions
Our analysis of U.S.-China clean energy trade highlights six trends that underscore the complexity and interconnectedness of trade relations in this sector between the largest and second-largest economies in the world. Specifically:
Clean energy markets are global. Trade flows between the United States and China demonstrate the global nature of clean energy markets and the opportunity they present for businesses. All told, the United States and China exchanged more than $8.5 billion worth of clean energy goods and services in 2011.
The United States has a $1.63 billion clean energy trade surplus with China. Considering all aspects of the value chain, U.S. exports and trade to China actually exceeded Chinese exports to the United States by $1.63 billion in 2011.
U.S. firms have an advantage resulting from national leadership in innovation and entrepreneurship. U.S. companies excel in production and sale of complex, high-margin, and performance-critical goods. These include capital equipment for manufacturing solar panels and LEDs, specialty chemicals, and materials needed for production of solar and wind products, as well as controls for energy systems.
U.S. companies are more active overseas than are their Chinese counterparts. Chinese firms have only small assembly operations in the United States for clean energy equipment. The U.S. clean energy trade picture significantly improves when the global footprint of U.S. firms that manufacture products overseas is taken into account.
China’s strength is more narrowly based on assembly and high-volume manufacturing. The data show that Chinese firms are relied on for large-scale manufacturing and high-volume assembly of finished products such as solar modules and LED fixtures, whereas the United States’ strength lies in a wide variety of high-technology products across clean energy sectors. Domestic clean energy targets for solar and wind power in China have provided ready and proximate markets for rapidly expanding its manufacturing capacity and allowed Chinese firms to gain a competitive advantage in the global marketplace.
Uncertainties surrounding U.S. clean energy policies are likely to have the greatest impact on domestic manufacturing in the clean energy industry. In the United States, clean energy policy is in a state of flux. Much of the demand associated with state-based renewable energy goals and standards has been met. Several key federal initiatives have expired or will soon expire, such as the Advanced Energy Manufacturing Tax Credit, the Department of Energy’s Loan Guarantee program for renewable energy deployment, and the Department of Treasury’s clean energy grants initiative. In addition, the Production Tax Credit and Investment Tax Credit face an uncertain future in ongoing tax and budget policy discussions. Policy choices, not China’s exports, will determine the direction of the U.S. clean energy industry in the months and years ahead.