In the New Cold-war on Energy, China Wins

During the Cold War (1945-1991), China was the only major country that stood at the intersection of the two superpower camps, a target of influence and enmity for both the United States and the Soviet Union. Today, China is creating a path to sustainable energy that could conceivably make it the most powerful nation in the world.

Threats to a countries energy security include the political instability of several energy producing countries, the manipulation of energy supplies, the competition over energy sources, attacks on supply infrastructure, as well as accidents and natural disasters. The limited supplies, uneven distribution, and rising costs of fossil fuels, such as oil and gas, create an immediate need to change to more sustainable energy sources.

Over the past 30-years, China has changed from a centrally planned system, that was largely closed to international trade, to a more market-oriented economy. As part of their strategy, China and Hong Kong have loaned the United States $940.9 billion dollar's to help pay the U.S. $3.498 trillion dollar debt. Certainly, this shows that China has faith in the U.S. Economy. More importantly, it gives China a steady cash return on its investment that can be put to use in further advancing its position in global affairs by stabilizing its energy future.

China is aware of the political instability created by the lack of a stabilized and sustainable source of energy. Therefore, they recently modified their 2006 Renewable Energy Law to require that every bit of renewable energy capacity generated in the country's hinterlands be connected to commercial grid networks by major utilities. However, this move entices western financiers to invest in China alternative energy programs instead of those in the U.S.

At the Copenhagen Climate Conference, Chinese negotiators showed up with major carbon intensity reduction targets in hand: they intend to cut carbon output per unit of GDP by 40%-45% before 2020, based on 2005 levels. Officials are also maintaining their raw target of that 15% of their entire energy production would come from clean energy over the next decade. That is up from 9% today.

In the United States, electricity networks still do not integrate clean energy into their power delivery mechanisms while in China those who do not integrate will face major fines. Thus, the burden of getting China's green power percentage to 15% by 2020 will rest squarely on the shoulders of grid administrators - not on wind and solar power plant operators.

Currently, in both China and the United States, regional utilities tend to operate too independently for a large-scale national clean energy roll-out to be implemented smoothly. However, China's central government asserts its control thus catalyzing market changes through the development of sustainable energy capabilities.

Obviously, the Chinese know that smart grid technology, like intelligent load metering, can only be maximized if all resources are linked to end-users in residential and commercial areas. Not so, in the U.S. Capitalist system, especially one with remnants of anti-regulatory fever, left over from the Ronald Reagan years, still waging war in Congress. Here in the U.S. clean energy companies can only hope that the Federal Energy Regulatory Commission will assert its oversight rights to build an integrate energy system.

China isn't just linking power supplies. The government just announced plans for 42 high-speed rail lines that will run nationwide at an average of 217 miles per hour. They know that speed is a key factor in pulling commuters and long-haul transit customers out of their cars and off of planes, both of which are heavy polluters that will hamper China's carbon intensity targets. Unlike U.S. rail policies, Beijing planners are committed to getting rail done right.

Even more broadly, the Financial Times reported on Tuesday, December 29, that China-focused equity funds took in $6.8 billion in 2009, leading emerging markets in absorbing a record amount of investment inflows during the year. Hong Kong Highpower (NASDAQ: HPJ) and China BAK Battery (NASDAQ: CBAK) have delivered extraordinary gains in 2009, proving how broad the green stock spectrum is in China. Best of all, China's top clean energy companies are bringing shares to Wall Street on a platter.

Without a doubt, in the new cold war over energy superiority, China is beating the U.S. hands-down.

For more info see: Andrew J. Nathan and Robert S. Ross, The Great Wall and the Empty Fortress: China's Search for Security (New York: W. W. Norton, 1997).Major Foreign Holders of Treasury Securities.

Power plays: Energy and Australia's Security (2007).The Green Chip Review: "The Chinese Clean Energy Boom No One Else Expected." (2009).

Michael Manford McGreer is author of "No Harm, No Foul, Bio-terrorism in the 21^st Century.