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.

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BusinessWeek’s current top story in Innovation News is “America Risks Missing Out in Clean Technology,” written by Robert Atkinson, President of the Information Technology & Innovation Foundation and co-author of “Rising Tigers, Sleeping Giant,” the first comprehensive comparison of Asian versus U.S. competitiveness in the clean-tech sector (co-authored by LeadEnergy staff).  He writes:

Everyone from President Barack Obama to mayors of small towns are proclaiming that green industry is the savior of the U.S. economy, bringing jobs to the unemployed, needed economic activity to distressed industrial regions, and an overdue shot in the arm to U.S. industrial competitiveness…

Yet these hopes are likely to remain unfilled unless the U.S. embarks on a very different course. A joint study by the Information Technology & Innovation Foundation, which I direct, and the Breakthrough Institute finds that Asia’s rising “clean-technology tigers”—China, Japan, and South Korea—have already passed the U.S. in the production of virtually all clean-energy technologies. The report, Rising Tigers, Sleeping Giant, also finds that between 2009 and 2013, the governments of these nations will out-invest the U.S. three-to-one in these sectors­, or $509 billion to $172 billion.

Read the full article at BusinessWeek.

In a promising development for aspiring clean energy scientists, engineers, and technicians, the Obama administration’s 2011 budget request includes a proposal for the nation’s first comprehensive federal education initiative focused on the clean energy sector, called RE-ENERGYSE (Regaining our Energy Science and Engineering Edge).

The initiative was originally proposed by President Obama in his April 2009 speech to the National Academy of Sciences, which he said would inspire and train young Americans to “tackle the single most important challenge of their generation — the need to develop cheap, abundant, clean energy and accelerate the transition to a low carbon economy.”

If appropriated by Congress, RE-ENERGYSE will be coordinated by the Department of Energy (DOE) and National Science Foundation (NSF), beginning with an initial investment of $74 million in clean energy-related education at universities, community and technical colleges, and K-12 schools. This will include a new $50 million program within DOE’s Office of Energy Efficiency & Renewable Energy (see full proposal), a $5 million program in DOE’s Office of Nuclear Energy (see full proposal), and a $19 million program within NSF (see overview and fact sheet). A summary of each program is included below.  DOE’s well-known Solar Decathlon is also proposed to become part of RE-ENERGYSE in FY2011.

This proposal comes after Congress rejected the original RE-ENERGYSE proposal in the administration’s FY2010 budget request, despite support from over 100 universities, professional associations, and student groups. The administration was forced to reduce its request from $115 million to $74 million — an unfortunate reduction, especially given the nation’s lagging position in STEM education and the global clean-tech industry — but the program is a very important step toward a full federal clean energy education initiative. Despite the current budgetary environment, the administration sees RE-ENERGYSE as a significant priority for supporting the nation’s clean energy transition and improving U.S. competitiveness in this sector.  As the Office of Energy Efficiency & Renewable Energy wrote in its proposal:

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The New York Times Green Inc. Blog takes note of the meteoric rise of China’s share of California’s solar market while American companies continue to falter.

Chinese companies have increased their market share from 2% to an astounding 46% in just three years, doubling in 2009 alone. This rise has been led by the Chinese solar giants Yingli and Suntech at 27% and 10% respectively.

Meanwhile, the United States accounts for only 16% of the market today – down from 43% three years ago – in a state that comprises 40% of the U.S. solar industry.

While the articles notes that the California market is expanding rapidly, making this competition “not necessarily a zero-sum game,” it is clear that even in the American state most known for renewable energy, it is China, and not the United States, exploiting the opportunity to its fullest.

A new article in Fortune Magazine cites the report “Rising Tigers, Sleeping Giant,” which was co-authored by LeadEnergy staff, and emphasizes the need for greater federal investment in clean energy R&D and education programs:

(Fortune Magazine) — Quick: which nation builds the most wind turbines? If you guessed America, with its blustery Great Plains dotted with whirring GE blades, you’d be wrong. In 2009, China became the planet’s largest producer.

What’s going on here? While America was digging itself out of its financial crisis, China quietly positioned itself to become a leader in what promises to be the largest emerging industry of the 21st century: green tech.

A new report by the Breakthrough Institute, a progressive think tank in Oakland, argues that China, along with Japan and Korea, will dominate the clean-energy race by out-investing America.

Asia’s clean-tech tigers are already launching massive government investment programs to dominate this industry and, according to the report, have surpassed the U.S. in virtually all clean-energy areas, including wind, solar, and electric-car batteries.

America, however, shouldn’t despair. But, says Alan Salzman, CEO of Vantage Point Venture Partners, a Silicon Valley VC firm, “We must ensure that our industrial policy — including laws, regulations, access to capital, and incentives — enables the big industries of the 21st century. It should not,” he continues, “preserve and entrench 19th-century ways of generating electricity, powering transportation, and consuming our natural resources.”

And those changes can’t come too soon.

How to become clean-tech competitive

Prime the pump
Washington should boost investment. Yes, Obama has agreed to spend $80 billion of the stimulus package on things green, but that pales next to the $217 billion the Chinese government plans to dole out over the next five years. Some experts are now calling for the feds to pump another $15 billion a year into basic research for solar, clean coal, and alternative fuels.

Retrain engineers
BYD, an electric-car company in China (Warren Buffett is an investor), has 10,000 engineers working on, among other things, making affordable batteries. With Detroit downsizing, the U.S. has plenty of engineers, but many need to be brought up to speed. One promising sign: A growing number of schools, including Purdue and Colorado State, are offering graduate-level degrees in electric energy systems.

Slash red tape
China just launched its GreenGen project, a $1 billion super-efficient coal plant that emits less greenhouse gas than traditional ones. America’s Duke Energy (DUK, Fortune 500) signed a pact with the utility building GreenGen to share clean-coal technology. Why? Because of bureaucratic delays it could take eight years to build such a plant in the U.S. — vs. three in China.

Breakthrough Institute has the story here:

A new Clean Energy Deployment Administration (CEDA) is critical to “position the U.S. as the global leader in the development and deployment of clean energy technologies for years to come,” according to a letter written by the country’s leading clean tech entrepreneurs, investors, and stakeholders.

Thirteen leading clean tech companies, including Google, GE, and Kleiner Perkins, wrote to President Obama last week urging him to expedite the creation of a Clean Energy Deployment Administration along the parameters outlined by the Senate’s American Clean Energy Leadership Act of 2009 (ACELA).

According to ACELA, a bipartisan product of the Senate ENR committee under the leadership of Senator Jeff Bingaman (D-NM), CEDA would be a new autonomous agency staffed with project financing experts and its own Administrator but maintain affiliation with the Department of Energy in order to benefit from DOE’s considerable energy expertise. CEDA would provide financial enhancement, much like a bank, through a flexible suite of credit augmentation tools, including loan guarantees, securitization, insurance, that would reduce risk for investors in clean energy innovation. CEDA’s financial support packages will thus help innovative new clean technologies secure private-sector financing, greatly increasing investment in this critical sector with limited risk to taxpayers.

For the full post, continue reading here.

A Senate Special Report released by Senator Wyden’s (D-OR) office provides a scoreboard check in the clean-energy race and makes the case for the United States to step up its efforts.  By highlighting rising international demand and growth in renewable energy markets, Wyden builds a strong case for the U.S. to capture this potential rather than allow itself to continue slipping in competitiveness. Secretary of Energy, Steven Chu testified to Congress in support of Wyden’s report, calling the clean-energy race “the challenge of our time.”

The thesis of the report is summed up here:

“As the global community pursues policies to reduce greenhouse gas emissions, mitigate climate change, and protect the environment, the appetite for goods and services that are needed to sup-port these policies is growing. This is a welcome development for the U.S. manufacturers of EG and the overall American economy. However, it appears that the U.S. is not fully seizing the economic opportunities that this situation provides. The available trade data demonstrate that U.S. producers have not kept pace with increasing domestic demand for EG, revealing lost opportunities for job creation and economic growth.”

The report backs this assertion up with a plethora of data, beginning with the 200% growth to $215 billion from 2004-2008 in exports of “environmental products,” 70% of which are associated with renewable energy.  While the United States did contribute $7.7 billion in export growth, this figure was greatly overshadowed by China’s $22.7 billion and Germany’s $19.6 billion increases.

This graph provides a salient image of the comparative stagnation of U.S. growth in relation to China and Germany:

Aside from comparisons to other countries, a key note about U.S. export markets is the significant potential they have shown with exports of PV products and wind turbines growing by $2.1 billion and $1.5 billion respectively.  Also noteworthy is the location of these improvements – primarily in states with strong government incentives like California and Texas.

Unfortunately, however, the increase in U.S. exports has not been enough to maintain its share of global markets.  U.S. market share of world exports dropped from 10.6% to 8.6% from 2004-2008, with declining shares of exports to every region of the world except Latin America.  Taking into account the considerable increases in demand that are likely to continue, the foregone economic opportunities are difficult to understate.

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In an important development within the federal energy and climate policy debate, Bill Gates and Senator Bingaman have spoken out in support of Secretary Chu’s push for major increases in clean energy R&D. Breakthrough Institute has the story:

After receiving no help from the White House to secure the $15 billion in annual energy R&D investment Obama promised during the campaign, Energy Secretary Steven Chu is speaking out for R&D — with the help of Sen. Jeff Bingaman and high tech billionaire Bill Gates.

The push by these three powerful figures comes in the wake of Republican Senator Scott Brown’s upset victory for Edward Kennedy’s seat and a series of high profile Democratic Senators, most recently Diane Feinstein, saying cap and trade can’t be passed this year.

Gates’s writings appear a week before the release of his “Annual Letter” as the head of the Bill and Melinda Gates Foundation, a letter which in past years has generated national controversy and news. The 2010 Letter, Gates says, will be about innovation.

The message from all three men is that R&D has gotten short shrift for too long from those pushing cap and trade and other regulations to reduce carbon emissions. And it comes a few days after Chu leaked a public letter to OMB head Peter Orzag, who was seeking to cut the DOE’s budget even further.

Chu, Bingaman, and Gates all say that cap and trade climate legislation (Waxman-Markey in the House, Kerry-Boxer in the Senate) would invest far too little in R&D, just $1.5 billion annually as compared to the $5 billion currently invested, and the $15 billion Obama has called for.

Read the full coverage here.