Catching a Second Wind -- Changing the Logic of International Cooperation in China’s Wind Energy Sector China’s wind energy sector presents a vivid case of the fundamental dilemma of climate technologies. On the one hand, the rapid development and global dissemination of climate technology is highly desirable and necessary as part of an effective strategy to tackle global climate change. On the other hand, these technologies are commercial products, developed and sold by companies on a fiercely competitive market. The logic of climate protection favors the open exchange of technological expertise between corporations. Contrarily, the logic of the market sets narrow boundaries for the sharing of profit-making innovation. Finding ways to reconcile these two aspects will be a decisive challenge faced on the way to solving the global climate crisis.

The case of wind energy in China presents a crucial illustration of the effects of this dilemma. The development of international cooperative structures that are able to provide innovative answers to pressing climate challenges has been hampered by the perception of today’s partners as tomorrow’s competitors in an economic zero-sum game. Chinese players tried to use partnerships as a means to gain a technological edge without an intention to grant their partners a long-term stake in its domestic market. International business actors tried to use partnerships as a means to gain access to China’s domestic wind power market without any real incentive to improve their partners’ long-term technological advancement. Ultimately, neither side got what it wanted. As a result, China’s wind sector stayed below its potential regarding its contribution to global climate protection.

Opportunity

International cooperation could catch a second wind in China’s renewable energy sector. China’s wind market is on the verge of a new development phase heralding a possible shift in the logic of international technology cooperation; the times of China simply “catching up” to foreign technologies are coming to an end. To maintain its growth, China’s wind sector will depend on original technological solutions to manage mounting problems of efficiency, transmission and intermittency. Current technological obstacles threaten the swift expansion of China’s wind power capacity, putting the achievement of China’s ambitious renewable energy targets for the year 2020 at risk. This creates strong political pressure to explore viable solutions such as smart-grid transmission systems and offshore wind power generation. The technological bottleneck of its wind energy sector significantly increases China’s incentives to revisit structures of international cooperation as a means to create urgently needed innovation. This situation inturn opens new opportunities for foreign political actors, specifically the European Union, to promote the emergence of cooperative structures that can make a tangible contribution to global climate protection.

From the business perspective, the growth of complementary capabilities between Chinese and international wind power companies increases the attractiveness of balanced and mutually beneficial partnerships. Chinese companies can benefit greatly from strategic alliances with international firms in their search for needed technological solutions, while foreign companies can take advantage of the uniquely favorable conditions that China offers for producing cutting-edge innovation in wind power technology. At the core of this mutually beneficial cooperative model lies the creation of shared innovation based on the joint exploration and joint ownership of original technological solutions. Joint development, however, requires a mode of cooperation radically different from the model of international partnerships that have characterized China’s wind sector in the past. It calls for deep working relationships and long-term strategic alliances rooted in mutual interests. Looking at the sobering experiences of the past, both sides will have to radically break with the current logic of interaction in order to redefine international partnerships.

Recommendations

Seizing the opportunity to change the logic of international cooperation in China’s wind energy sector does not come without risk. Business actors on both sides will be reluctant to enter into comprehensive partnerships fearing that their engagement will follow the familiar unsustainable pattern of cooperation. Foreign companies will be concerned about sharing technological expertise without getting significant market entry in return. At the same time, skepticism about foreign companies’ willingness to share the latest technology and cooperate on an equal footing will result in Chinese companies being reluctant to provide entry points into the domestic market. Newly emerging incentive structures are currently opening a window of opportunity for breaking this vicious cycle, but change will not occur without decisive action. Both sides will have to credibly signal a fundamental change in approach in order to prepare the ground for new models of cooperation. In addition, governmental actors on both sides will have to play an active role in facilitating this development by providing additional incentives and minimizing possible risks for those companies willing to take the cooperative logic to the next level.

Based on the analysis of past mistakes as well as present opportunities, this paper outlines ways in which the emergence of a new model of international cooperation in China’s wind power sector can be facilitated by all parties involved. The recommendations specifically address four groups of actors: China’s political leadership, Chinese companies active in the wind sector, the European Union (EU) as a political actor1 and European companies involved in the development, manufacturing and trade of wind energy equipment. The required change in the logic of international technology cooperation can only be achieved if all of these groups alter their current behavior with regards to three interlinked dimensions:

Shift in paradigm to reflect the changing realities of China’s wind energy market
Targeted public and private investment in strategically chosen technology areas
Improved management of intellectual property rights (IPR) and profits from innovation

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