by Tim Folger
Wu saw little reason to start from zero: Goldwind licensed a design from Jacobs Energie, a German company. Manufacturing was not as simple. Early attempts were a "terrible failure," Wu said. "Whole blades dropped off." He shook his head. "The main shafts broke. It was really very dangerous."
Goldwind shut down for three months. The company eventually solved the problems, and, with the help of 863 and other government funding, it expanded into a full range of large and sophisticated turbines. Many of them were licensed from abroad, but as they were built in China, they sold for a third less than European and American rivals. Goldwind's sales doubled every year from 2000 to 2008. In 2007 Wu took the company public, and garnered nearly $200 million.
China has made up so much ground on clean tech in part through protectionism—until recently, wind farms were required to use turbines with locally manufactured parts. The requirement went into effect in 2003; by the time it was lifted, six years later, Chinese turbines dominated the local market. In fact, the policy worked too well: China's wind farms have grown so fast that according to estimates, between 20 and 30 percent aren't actually generating electricity. A surplus of factories was only part of the problem: local bureaucrats, it turned out, were being rewarded not for how much electricity they generated but for how much equip ment they installed—a blunder that is often cited by skeptics of China's efforts.
They have a point; many factories are churning out cheap, unreliable turbines because the government lacks sufficient technical standards. But the grid problem is probably temporary. China is already buying and installing the world's most efficient transmission lines—"an area where China has actually moved ahead of the U.S.," according to Deborah Seligsohn, a senior fellow at the World Resources Institute. In the next decade, China plans to install wind power equipment capable of generating nearly five times the power of the Three Gorges Dam, the world's largest producer.
After I met with Wu Gang, the company's director of strategy and global development, Zhou Tong, an elegant woman in her thirties, handed me a hard hat and walked me next door to the turbine-assembly plant, an immaculate four-story hangar filled with workers in orange jumpsuits piecing together turbine parts that were as big and spacy-looking as Airstream trailers. The turbines were astonishing pieces of equipment—so large that some manufacturers put helicopter pads on top—and the technical complexity dispelled any lingering image I had of Chinese factories as rows of unskilled workers stooped over cheap electronics. Wandering among the turbines, we passed some Ping-Pong tables, where a competition was underway, and stopped in front of a shiny white dome that looked like the nose of a passenger jet. It was a rotor hub—the point where blades intersect—and it was part of Goldwind's newest treasure, a turbine large enough to generate 2.5 megawatts of electricity, its largest yet. "Wow, this is a 2.5!" Zhou exclaimed. "I saw the first one in Germany. This is the first one I've seen here." Wu was set to unveil the new turbine at a press conference the next day. A flatbed truck, loaded with turbine parts and idling in the doorway, was bound for wind farms throughout Manchuria.
The prospect of a future powered by the sun and the wind is so appealing that it obscures a less charming fact: coal is going nowhere soon. Even the most optimistic forecasts agree that China and the United States, for the foreseeable future, will remain ravenous consumers. (China burns more coal than America, Europe, and Japan combined.) As Julio Friedmann, an energy expert at the Lawrence Livermore National Laboratory, near San Francisco, told me, "The decisions that China and the U.S. make in the next five years in the coal sector will determine the future of this century."
In 2001 the 863 Program launched a "clean coal" project, and Yao Qiang, a professor of thermal engineering at Beijing's Tsinghua University, was appointed to the committee in charge. He said that its purpose is simple: to spur innovation of ideas so risky and expensive that no private company will attempt them alone. The government is not trying to ordain which technologies will prevail; the notion of attempting to pick "winners and losers" is as unpopular among Chinese technologists as it is in Silicon Valley. Rather, Yao sees his role as trying to insure that promising ideas have a chance to contend at all. "If the government does nothing, the technology is doomed to fail," he said.
Grants from the 863 Program flowed to places like the Thermal Power Research Institute, based in the ancient city of Xi'an in the center of China's coal country. "The impact was huge," Xu Shisen, the chief engineer at the institute, told me over lunch recently. "Take our project, for example," he said, referring to an experimental power plant that, if successful, will produce very low emissions. "Without 863, the technology would have been delayed for years."
After lunch a pair of engineers took me to see their laboratory: a drab eight-story concrete building crammed with so many pipes and ducts that it felt like the engine room of a ship. We climbed the stairs to the fourth floor and stepped into a room with sacks of coal samples lining the walls like sandbags. In the center of the room was a device that looked like a household boiler, although it was three times the usual size, and pipes and wires bristled from the top and the sides. It was an experimental coal gasifier, which uses intense pressure and heat to turn coal dust into a gas that can be burned with less waste, rather than burning coal the old-fashioned way. With a coal gasifier, it is far easier to extract greenhouse emissions so that they can be stored or reused instead of floating into the atmosphere. Gasifiers have been around for decades, but they are expensive—from $500 million to more than $2 billion for the power-plant size—so hardly any American utilities use them. The researchers in Xi'an, however, set out to make one better and cheaper.
One of the engineers, Xu Yue, joined the gasifier project in 1997. A team of ten worked in twelve-hour shifts, conducting their experiments around the clock. "There was a bed there," he said, pointing to the corner of a soot-stained control room. (The image of China as a nation of engineers toiling for pennies is overstated; Xu Yue works hard, but he earns around $100,000 a year.) Beyond salaries, everything about the lab was cheaper than it would have been in the United States, from the land on which it was built to the cost of heating the building, and when the gasifier was finished it had a price tag one-third to one-half that of the equivalent in the West.
When Albert Lin, an American energy entrepreneur on the board of Future Fuels, a Texas-based power-plant developer, set out to find a gasifier for a pioneering new plant that is designed to spew less greenhouse gas, he figured that he would buy one from GE or Shell. Then his engineers tested the Xi'an version. It was "the absolute best we've seen," Lin told me. (Lin said that the "secret sauce" in the Chinese design is a clever bit of engineering that recycles the heat created by the gasifier to convert yet more coal into gas.) His company licensed the Chinese design, marking one of the first instances of Chinese coal technology's coming to America. "Fifteen or twenty years ago, anyone you asked would have said that Western technologies in coal gasification were superior to anything in China," Lin said. "Now, I think, that claim is not true."
The 863 Program took much of its shape from the American research system used by the National Institutes of Health and the Department of Defense: the government appointed panels of experts, who drew up research priorities, called for bids, and awarded contracts. In 1987 the government gave it an initial budget of around $200 million a year. That figure was small by Western standards, but the sum went far in China, according to Evan Feigenbaum, an Asia specialist at the Council on Foreign Relations, who studied the program. When I mentioned to Xu Shisen, the coal engineer in Xi'an, that American scientists are dubious of top-down efforts to drive innovation, he suggested that the system is more competitive than outsiders imagine. "It is very intense—like a presidential election," he joked, and he sketched out the system: "Normally, each project will have five to eight contenders—some less, some more—but there is a broad field of innovators. A lot of companies are doing the same thing, so everyone wants to have a breakthrough." He went on, "It's
not possible to have a flawless system, but it makes relatively few mistakes. It combines the will of the state with mass innovation."
R & D expenditures have grown faster in China than in any other big country—climbing about 20 percent each year for two decades, to $70 billion last year. Investment in energy research under the 863 Program has grown far faster: between 1991 and 2005, the most recent year on record, the amount increased nearly fifty-fold.
In America things have gone differently. In April of 1977, President Jimmy Carter warned that the hunt for new energy sources, triggered by the second Arab oil embargo, would be the "moral equivalent of war." He nearly quadrupled public investment in energy research, and by the mid-1980s the United States was the unchallenged leader in clean technology, manufacturing more than 50 percent of the world's solar cells and installing 90 percent of the wind power.
Ronald Reagan, however, campaigned on a pledge to abolish the Department of Energy, and once in office, he reduced investment in research, beginning a slide that would continue for a quarter-century. "We were working on a whole slate of very innovative and interesting technologies," Friedmann, of the Lawrence Livermore lab, said. "And, basically, when the price of oil dropped in 1986, we rolled up the carpet and said, 'This isn't interesting anymore.'" By 2006, according to the American Association for the Advancement of Science, the U.S. government was investing $1.4 billion a year—less than one-sixth the level at its peak, in 1979, with adjustments for inflation. (Federal spending on medical research, by contrast, nearly quadrupled during that time, to more than $29 billion.)
Scientists were alarmed. The starkest warning came in 2005, from the National Academies, the country's top science advisory body, which released Rising Above the Gathering Storm, a landmark report on U.S. competitiveness. It urged the government to boost investment in research, especially in energy. The authors—among them Steven Chu, then the director of the Lawrence Berkeley National Laboratory and now the secretary of energy, and Robert Gates, the former CIA director and now the secretary of defense —wrote, "We fear the abruptness with which a lead in science and technology can be lost—and the difficulty of recovering a lead once lost, if indeed it can be regained at all."
They called for a new energy agency that could spur the hunt for "transformative" technologies. It would inject money into universities and companies and would be called the Advanced Research Projects Agency-Energy, or ARPA-E, modeled on DARPA, the Defense Department unit that President Eisenhower founded in response to Sputnik. (DARPA went on to play a significant role in the invention of the Internet, stealth technology, and the computer mouse, among other things.) ARPA-E, they hoped, would shepherd new energy inventions from the lab to the market, bridging the funding gap that is referred to in engineering circles as the "valley of death." Congress approved the idea in 2007, but President George W. Bush criticized it as an "expansion of government" into a role that is "more appropriately left to the private sector." He never requested funding, and the idea fizzled.
Other plans withered as well. In January 2008, the Bush administration withdrew support for FutureGen, a proposed project in Illinois that would have been the world's first coal-fired, near-zero-emissions power plant. The administration cited cost overruns, saying the price had climbed to $1.8 billion, but an audit by the Government Accountability Office later discovered that Bush appointees had overstated the costs by $500 million. House Democrats launched an investigation, which concluded, "FutureGen appears to have been nothing more than a public-relations ploy for Bush Administration officials to make it appear to the public and the world that the United States was doing something to address global warming." An internal Energy Department report had warned that canceling the project would set back the advance of carbon-storage technology by "at least 10 years." An e-mail between officials emphasized that Bush's secretary of energy, Samuel Bod-man, "wants to kill" FutureGen "with or without a Plan B." (Bod-man denies that costs were overstated.)
After FutureGen foundered, China broke ground on its own version: GreenGen. If it opens as planned in 2011, China will have the most high-tech low-emissions coal-fired plant in the world.
Two summers ago, a truckload of Beijing municipal workers turned up in my neighborhood and began unspooling heavy-duty black power lines, which they attached to our houses in preparation for a campaign to replace coal-burning furnaces with electric radiators. Soon the Coal-to-Electricity Project, as it was called, opened a small radiator showroom in a storefront around the corner, on a block shared by a sex shop and a vendor of funeral shrouds. My neighbors and I wandered over to choose from among the radiator options.
Two-thirds of the price was subsidized by the city, which estimates that it has replaced almost 100,000 coal stoves since the project began five years ago, cutting down on sulfur and dust emissions. I settled on a Marley CNLS340, a heater about the size of a large suitcase, manufactured in Shanghai. It had a built-in thermostat preprogrammed to use less electricity during peak day hours and then store it up at night, when demand was lower—a principle similar to the "smart meters" that American utilities plan to install in the next decade.
Neighbors began cutting their electricity bills by climbing up to their rooftops and installing solar water heaters—simple pieces of equipment with a water tank and a stretch of glass tubing to be heated by the sun. (China, which produces 50 percent of the world's solar heaters, now uses more of them than any other country.) And in the hardware stalls of the raucous covered market nearby, where the inventory ranges from live eels to doorbells, coiled high-efficiency light bulbs began crowding out traditional bulbs for sale. The government, it turned out, had instituted a 30-percent wholesale subsidy on efficient bulbs. Without anybody really noticing, China sold 62 million subsidized bulbs in ten months.
When Hu Jintao called on China to adopt a "scientific concept of development" in 2003, he was making a point: China's history of development at all costs had run its course. And in ways that were easy to overlook, China had embarked on deep changes.
In the summer of 2005, Edward Cunningham, a Ph.D. student researching energy policy at MIT, was traveling in the Chinese countryside when he noticed something peculiar: the government was allowing the price of coal to rise sharply after decades of controls. "I said, 'How the hell?'" he recalled. "'That can't be right. Maybe this is just some freak anecdotal evidence.'" It was in fact a pivotal change: manipulating the price of coal had always insured that Chinese utilities would produce ever more electricity, but the unhappy side effect was that utilities needed to build nothing more efficient than the cheapest, dirtiest plants. Coal prices had begun to rise, however, and that would leave power plants no choice but to install cleaner, more efficient equipment. Cunningham, now a postdoctoral fellow at Harvard, said that the effect had broad consequences. "We are going to see a huge amount of learning that we have not seen in the U.S."
Learning, in technology terms, is another way of saying "reducing cost." The more a technology is produced, the cheaper it becomes, and that can lead to change as revolutionary as dreaming up an invention in the first place: Henry Ford invented neither the automobile nor the assembly line. He simply perfected their combination to yield the world's first affordable cars.
In the same way, technology that is too expensive to be profitable in the West can become economical once China is involved; DVD players and flat-screen televisions were luxury goods until Chinese low-cost production made them ubiquitous. So far, many of the most promising energy technologies—from thin-film solar cells to complex systems that store carbon in depleted oil wells—are luxury goods, but the combination of Chinese manufacturing and American innovation is powerful; Kevin Czinger, a former Goldman Sachs executive, called it "the Apple model." "Own the brand, the design, and the intellectual property," he said, and then go to whoever can manufacture the technology reliably and cheaply. A few years ago, Czinger began looking at the business of electric cars. Detroit was going to move slowly, he figured, to avoid u
ndermining its main business, and U.S. startups, including Tesla and Fisker, were planning to sell luxury electric cars for more than $80,000 each. Czinger had something else in mind.
"These cars should be far simpler and far cheaper than anything that's manufactured today," he told me when we met last spring in Beijing. At fifty, Czinger has brown hair swept back, sharp cheekbones, and an intensity that borders on the unnerving. ("Kevin Czinger was the toughest kid to play football at Yale in my thirty-two years as head coach," Carm Cozza, the former Yale coach, wrote in a memoir. "He was also the most unusual personality, probably the outstanding overachiever, maybe the brightest student, and definitely the scariest individual.")
In the spring of 2008, Czinger signed on as the CEO of Miles Electric Vehicles, a small electric-car company in Santa Monica that was looking to expand, and he went searching for a Chinese partner. He ended up at Tianjin Lishen Battery Joint-Stock Company. A decade ago, Japan dominated the world of lithium-ion batteries—the powerful lightweight cells that hold promise for an electric-car future—but in 1998 the Chinese government launched a push to catch up. Lishen received millions in subsidies and hundreds of acres of low-cost land to build a factory. The company grew to $250 million in annual sales, with customers including Apple, Samsung, and Motorola. Last year the 863 Program gave Lishen a $2.6-million grant to get into the electric-car business. That is when Czinger showed up. "We hit it off immediately," Qin Xingcai, the general manager of Lishen, said.