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The Cleantech Revolution: "Largest Market Opportunity in the History of the Planet"?

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Guess post by Ishan Nath

A special three-part series in last week's San Jose Mercury News, entitled "The Cleantech Revolution," highlighted the enormous economic opportunity in the clean-tech sector and warned that the U.S. is quickly falling behind while Asia seeks to gain global market dominance.

In its analysis of the clean technology market, the Mercury's rhetoric is grand and its data convincing. The first part of the series begins:

"Cleantech is poised to be the valley's third great wave of innovation -- not just the next big thing, but perhaps the biggest thing ever. Confronting the peril of greenhouse gases and climate change happens to be a multi-trillion-dollar business opportunity."

The numbers provided support this claim: U.S. yearly utility bills exceed $1 trillion annually and the global energy and transportation market is estimated at $7 trillion. The wind and solar industries -- valued at $80 billion in 2008 -- are projected to triple in 10 years and employ 2.6 million people. Smart-grid technology, according to Morgan Stanley, will grow to $100 billion by 2030 and Cisco Systems believes smart-grid communications infrastructure could be worth $20 billion in the next 5 years.

In a nod to its geographic location, the paper focuses primarily on Silicon Valley's role in the industry. And local experts have a strong take on the subject:

"When it comes to cleantech, we have the largest market opportunity in the history of the planet driven by global climate change, resource constraints and energy independence," said Dallas Kachan, managing director of Cleantech Group. "Silicon Valley is critical to this revolution, but it does not occupy the throne it once did."

"Energy is the biggest opportunity Silicon Valley has ever seen," declared T.J. Rodgers, the founder of Cypress Semiconductor and chairman of SunPower, a leading maker of photovoltaic panels to produce solar energy.

Much of the progress being made in the U.S. can be attributed to venture-capital funding, a development for which the Mercury has encouraging news. Venture capital investment in clean-technology grew from 3% to 25% of overall investment over the last few years, expanding from $908 million in 2002 to $8.5 billion in 2008. Significantly, California garnered 40% of the world's funding in 2009. The Bay Area's 7,000 renewable energy jobs make it the country's biggest hotspot.

So with all this venture-capital flowing in, the American cleantech industry must be in good position, right? Wrong. The Mercury makes a strong appeal for the alarm bells to start going off in Washington about the state of American competitiveness.

The report declares:

"In other tech revolutions of recent decades, Silicon Valley became the uncontested global leader. The region's ability to innovate its way to the top in cleantech, though, is far from guaranteed. Competition is fierce and global, with trillions of dollars at stake."

True, the Valley has benefited from venture capital funding and has built-in advantages with decades of expertise in semiconductors and software - vital to solar energy production and grid integration strategies - but there are simply too many disadvantages to ignore.

For one thing, the American education system isn't doing the clean energy revolution any favors, as noted venture capitalist Vinod Khosla observes:

"We (in Silicon Valley) don't have a natural advantage in talent -- like chemical engineers, fermentation experts, engine designers and physicists."

This statement underscores the urgency for RE-ENERGYSE, the comprehensive energy education proposal from the Department of Energy that a growing number of organizations are mobilizing behind. But solving the problem doesn't end there.

Like several other sources -- including "Rising Tigers, Sleeping Giant," the first comprehensive comparison of Asian vs. U.S. clean-tech competitiveness -- this report outlines the extensive foreign investment in clean-energy, particularly in China. Pointing to annual investment in excess of $100 billion, renewable energy requirements, and tax incentives, the Mercury shows how China has already overtaken the lead in key markets such as solar. Once again, testimony backs the evidence, starting with a prominently supported letter to Energy Secretary Steven Chu.

A group of valley tech executives, including former Intel CEO Andy Grove, recently sent a letter to Chu urging the energy secretary to "sound the alarm bell to make America aware -- clearly and unequivocally -- of how rapidly other nations, particularly China, are moving on clean energy.

"Unless we move quickly and commit substantial resources on a sustained basis, we risk becoming an energy also-ran, and risk developing a new dependency," said the letter

Only 5 of the world's top 30 wind, solar, and battery companies are in the United States. And on the current trajectory of only about $4 billion in annual federal investment in clean energy R&D -- far below the $15 billion recommended by Nobel Laureate scientists -- that trend will continue:

"Unless there's a dramatic shift in national policy in the United States, the road to success in cleantech most likely goes through Beijing," said Matthew Lewis, spokesman for the San Francisco office of ClimateWorks Foundation, an international philanthropic network that promotes clean energy. "From a policy perspective, they are doing everything right."

And as the U.S. continues not to do everything right, the need for investment remains so acute because the technologies are still so new.

Every aspect of cleantech "needs new science," said Kevin Surace, CEO of Serious Materials.

Without adequate federal funding, this new science will come out of Beijing, as the Chinese aim to use "cleantech as a gold rush that will propel Chinese companies to world-domineering status."

This prospect need not be seen entirely as a threat as Peggy Liu, founder of the Joint US-China Collaboration on Clean Energy, sees it: "I'm afraid people are setting up China as the enemy," she said. "You need to treat China like a partner."

Liu is probably right: clean-energy development is not a zero-sum game and US-China cooperation could benefit from the competitive advantages in both countries.

But the way it stands right now, the United States is standing still while other countries take advantage of "not just the next big thing, but perhaps the biggest thing ever."

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