THE BLOG

China Outpaces U.S. in Clean Energy Investment, Again

04/03/2014 10:09 am ET | Updated Jun 03, 2014
  • Peter Ogden Senior Fellow, Center for American Progress

Today the Pew Charitable Trust released its annual ranking of how countries are faring against one another in the clean energy race, and China has for the fourth time in the past five years overtaken the United States as the global leader in clean energy investment.

On one level, the growth of clean energy markets -- whether it be in China or elsewhere -- is a good thing, and we should welcome the fact that countries around the world are redoubling their efforts in this space. Over 100 countries, for instance, now have national renewable energy standards, which, among other things, opens up new opportunities for U.S. exports of goods and services. But it also means that the United States must enhance its competitiveness and attractiveness as a place to invest in clean energy, or it risks losing its share of the growing clean energy market.

To keep up, the United States will need to take new steps that build on what has been accomplished over the past five years and fills the void left by the winding down of many of the important clean energy and energy efficiency programs and investments made through the American Recovery and Reinvestment Act of 2009.

Unfortunately, there is little indication that Congress is poised to lead on this issue going forward, so it is imperative that the administration use all of the tools it has at its disposal to meet this challenge. Here are three things that it can do right away:

First, the administration should use the greenhouse gas regulations for existing power plants that it will propose in June to promote clean energy investment. One way to do this is by allowing for states to use renewable energy targets and other market-based systems as a way to comply with the new standards. This will give states the flexibility to determine the most cost-effective methods to meet the new requirements, while spurring clean energy demand and investment.

Second, the administration should maximize inward foreign direct investment in new projects in the U.S. clean energy sector. By attracting greater foreign investment in new, or so-called "greenfield," clean energy projects, the U.S. will accelerate clean energy deployment and overall investment. FDI gets relatively little attention in the clean energy context, aside from the occasional news about a clean tech company being acquired by a foreign company. Yet the U.S. leads the world in overall inward FDI, with inflows totaling more than $1.5 trillion since 2006. To help maximize clean energy's share of this investment, the Department of Commerce should create a clean energy investment track within the SelectUSA initiative, a federal program designed to attract investment in U.S. businesses from both domestic and foreign firms. Currently, investors have to navigate federal, state, and local government incentives, regulations, and potential locations to determine the best place to invest in the U.S. With new databases that capture the widespread opportunities in solar, wind, and other clean energy technologies, as well as the myriad of national, state, and local incentives, SelectUSA could become the go-to source for investors interested in clean energy and help them to streamline their processes for investment.

Third, the administration should expand the use of existing financial instruments to increase institutional investment in clean energy. Financial tools new to the clean energy sector have started cropping up around the country and are changing the way clean energy is financed. However, some of these financing mechanisms, such as securitization and investment yield vehicles ("yield cos"), have not yet become mainstream in the sector and other tools, including real estate investment trusts (REITs), are not widely available to clean energy investors. As the technologies mature, it is critical that investors are aware of these types of financing options and are able to take advantage of them.

To help, the Departments of Commerce and Treasury should create a task force of investors, clean energy finance experts, and leaders in the clean energy sector to facilitate utilization of these financial instruments as well as to develop or make available new ones. For instance, the task force could develop a database that would provide information on investment opportunities in the clean energy sector to investors through Bloomberg terminals and other channels. The administration could also request that the Internal Revenue Service issue a revenue ruling to allow REITs to invest in clean energy assets since these rulings are currently made on a case by case basis.

By taking these steps, the Obama administration can build on the success of the past five years, help to keep the United States competitive in the burgeoning global clean energy economy, and perhaps even once again regain the top spot in the clean energy investment race.

Pete Ogden is a Senior Fellow at the Center for American Progress and was director of international climate policy for the Obama White House National Security Council. Marie Hernandez is a Research Associate at the Center.