09 February 2013
In her new book, Green Innovation in China: China’s Wind Power Industry and the Global Transition to a Low Carbon Economy, Dr. Joanna Lewis, Assistant Professor at Georgetown University explores the rapid growth in China’s wind technology in the past 10 years, and launched the book at the Wilson Center with a panel discussion on the topic of green innovations and wind technology advances in China that could potentially strengthen U.S.-China collaboration in green technology.
Clean energy is currently a $60-70 billion dollar industry in China, and wind energy in particular is the third largest electricity source in China. Hence, wind energy in China is a perfect example of how investments in clean energy, proper policy support, and technology transfer from foreign firms can result in a success story for the renewable energy industry. In the panel discussion, Dr. Lewis analyzed three models of technology transfer: licensing; mergers and acquisitions; and joint development.
In order for China to expand in their wind advances, the industry sought out technology transfers from foreign firms. One model for these transfers Dr. Lewis discussed was licensing. By licensing a product, the country is able to lower the cost in research and rely on the cost of research and development already shouldered by foreign firms. However, when using the licensing model, countries run the risk that most products available to license are outdated, and restrictions on Intellectual Property Rights (IPR) use could limit full implementation.
A second model Dr. Lewis suggested was mergers and acquisitions. By merging foreign firms into Chinese companies, Chinese companies are able to obtain control over IPR, which gives the companies more flexibility when manufacturing the product. However, merging or acquiring foreign firms requires a sufficient financial resources, and the companies merging must be able to integrate new knowledge into current business. One example is the Chinese company, Goldwind, which began developing their product through foreign companies but later acquired majority control in these same companies.
The third model Dr. Lewis presented--joint development--is considered to be the most common method of technology transfers. The benefits of joint development is that there are no concern about market competition and less concern about IPR since design and manufacture happens under the same umbrella. The only obstacle that may occur is that design firms may not have experience in manufacturing experience, and vice versa. Usually larger entrants going into the wind industry, such as South Korea and India, rely more on joint developments.
Some key findings Dr. Lewis highlighted in her book, include:
- Substantial advances in technology are possible in relatively short amounts of time. For instance, India, South Korea, and China took less than ten years to go from no experience to competing wind turbine systems.
- Licensing is relatively inexpensive way to acquire knowledge, but future potential is limited due to IPR and market restrictions. Licenses also frequently come from the same companies, which makes it non-exclusive.
- Tapping into global learning and innovation networks can be highly valuable. India company Suzlon created a network of strategically positioned global subsidiaries to contribute to its base of industry knowledge and technology capacity. China's Goldwind also acknowledges such value, and South Korea’s new entrants are looking for partnerships globally.
The growth of the global wind industry highlights the importance of technology transfers in global commercial development, and emphasizes how governments must focus on strengthening bilateral cooperation in order to increase such transfers. However, policies aimed at encouraging technological transfers or subsidizing renewable energy may violate WTO agreements; particularly, local-content requirements that China waived in 2009 have spurred ongoing disputes involving China, US, Canada, EU, and South Korea.
Likewise, as much as a global network is encouraged, there are still barriers to accessing the knowledge necessary to develop next-generation technologies. For instance, commercial technology may be acquired through private sector transfers; however, when it comes to advanced/pre-commercial technologies, leaders are not willing to give up IPR to competitors. One example in this case is the Chinese solar PV industry, in which there has been quite a strong pushback against compulsory licensing. There must be government support in creating the correct cross-national innovation. Hence, in order to have successful global networks, there must also be cooperation between the commercial industry and international governments. Although the United States has not reached the same level of capacity in the wind industry as China or India, collaboration between the nations could change this. Increased U.S.-China cooperation could serve as the answer to future global trends outside of green technology, including increased population, expanding middle classes, and urban development.