The United States will need its entrepreneurial spirit to compete with deep-pocketed China in the race to develop green energy technologies, U.S. Energy Secretary Steven Chu said on Monday.

China is moving very aggressively, Chu said at an event organized at Silicon Valley headquarters of search giant Google Inc. They're now spending more than $100 billion a year in developing clean energy.

Chu, announcing grants for 'out-of-the-box' business ideas that challenge conventional thinking, said United States has incredible opportunities to lead in green technology.

If you set the conditions right ... we can do it better than anyone else can because the entrepreneurial spirit is so good in the United States, he added.

China has emerged as a cleantech hub thanks to its strong local markets and financing sources while in the United States, the industry is still struggling from a dearth of financing and what the industry sees as a need for clearer federal policies on renewable energy.

Chu, who is scheduled to testify before Congress on Tuesday about the need for legal caps on greenhouse-gas emissions, also said such caps to limit emissions would be key to boost research and development of green technologies.

U.S. lawmakers are currently wrestling with climate change legislation in Congress, including a cap and trade for carbon emissions that would lower carbon emissions from smokestacks over the next four decades by creating a market for carbon pollution credits.

Chu announced $151 million in U.S. funding for 37 green research projects, including those that could allow intermittent energy sources like wind and solar to provide a steady flow of power, or use bacteria to produce automotive fuel from sunlight, water and carbon dioxide.

The funding was part of the Department of Energy's Advanced Research Projects Agency-Energy unit, which provides access to funding for early stage green technology projects.

Of the lead recipients, 43 percent are small businesses, 35 percent are educational institutions and 19 percent are large corporations, according to DOE.

The recipients includes automaker General Motors Co [GM.UL] for development of a device to convert waste heat from car engines into electricity and Massachusetts Institute of Technology for development of a liquid metal grid-scale battery for low-cost, large-scale storage of electrical energy.

These are out of the box approaches, Chu said of the research. Of that 37, if we get three home runs that's terrific.

In a chat with Google Chief Executive Eric Schmidt later at the company's headquarters, attended by the search giant's employees, Chu also said difficulties in siting of new transmission lines to carry green energy is a major roadblock for the technology.

Nobody wants it in their backyard, Chu said, adding that he favored programs that would provide incentives to landowners to ease the opposition.

In a light moment, when asked by Schmidt how the Nobel physics laureate felt to be a senior scientist in Congress, Chu replied, It's fun, in a macabre sort of way.

I don't think Congress treats me like your average cabinet member, he added.

That's because you know something, Schmidt quipped.

(Editing by Steve Orlofsky)