Economic Development and Environmental Sustainability
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Jon Li: China¡¯s energy conservation industry will accelerate its development in 5 years

In the upcoming 3 years, the industry of energy conservation and environmental protection in China will maintain a compound growth of more than 40%. According to the prediction data given by Mr. Xie Zhenghua (deputy director of NDRC), the total output value of energy conservation and environmental protection industry in China will reach 2800 billion yuan in 2012. According to other prediction data, the total output value of energy conservation and environmental protection industry will reach 5000 billion yuan in 2015, which equals to about 10% of GDP of the same period.

Therefore, energy conservation and environmental protection is a megtrend both from the national and from the market dimension.

But, beyond this data, what is the current situation and prospect for the energy conservation industry in China? What problems shall we face in the future? How to do we further promote the development of the energy conservation market? With these questions, a journalist of Science Times interviewed IEEPA CEO Jon Li.

Science Times: Energy conservation and environmental protection ranks first in the seven strategic emerging industry sectors, but what  is the strategic position of energy conservation and environmental protection industry in China? What¡¯s the potential capacity of energy conservation in China?

Mr. Jon Li: In my opinion, the industry of energy conservation and environmental protection is one of the most important national strategies in China¡¯s 21st century.

With the development of China¡¯s economy, energy consumption will continue to grow inevitably. The energy consumption demand in China can be solved mainly through 3 channels: the first one is to reserve mining of itself while importing energy or developing with other countries; the second one is to increase the ratio of renewable energy; the third one is to conserve energy, including conserving energy resources and improving energy efficiency.

From the aspect of national target and actual situation, it takes time to increase the ratio of renewable energy improve the market operation and development of renewable energy, which is a medium and long term investment. Therefore, the ratio of renewable energy will be limited to some extent for the next 5-10 years,

The potential of energy conservation in China is enormous. The total energy efficiency in China is about 33%, about 10% lower than that in developed countries, and there is a big space in the development of energy conservation industry.

On the other hand, from the aspect of policy analysis, the Chinese government has clearly stated that the emission of carbon dioxide per unit of GDP in 2020 will decrease 40%-45% compared to those in 2005. Among them, the main approach is energy conservation and consumption reduction. According to experts¡¯ estimation o, energy conservation will contribute 80% or even more than 85% to the target of 45% decrease, and this is expected to reach 90% in 2020.

Science Times: What are the main development fields of energy conservation and environmental protection in China?

Mr.Jon Li£»Currently, the energy conservation industry in China can be divided into 4 main fields, namely industry energy conservation, building energy conservation, traffic energy conservation, and residential energy conservation.

Among them, industry energy conservation is deemed to be the most worthy field to invest in, since 70% energy is consumed by sectors like steel, nonferrous, building material, petroleum processing, coking, chemical industry, electricity.

Building energy conservation is deemed to be the most popular field in China. Building energy consumption accounts for more than 27% of total energy consumption, and it grows with a velocity of 1% per year.

Statistical data from the Ministry of Housing and Urban-Rural Development shows that the area of newly built houses and buildings per year in China approaches 2 billion square meters, and among them, more than 80% are energy intensive buildings. The area of the existing buildings approaches 40 billion square meters, and of them more than 95% are energy intensive buildings. The new housings and buildings are almost designed according to energy conservation standards, and the ration reaches 95.7%, while the ratio in construction stage for implementing the energy-saving design is only 53.8%. There is enormous potential in building energy conservation reconstruction and technology innovation.

In the field of traffic energy conservation, the diversification of vehicle energy and electrification of automobile power represents technology reform and transformation trend of the dynamic system of traffic energy.

Living energy conservation or residential energy conservation is mainly focused on family life, and you can earn a lot from energy conservation application field of household appliances and daily life.

The industry of energy conservation and environmental protection includes energy conservation and cyclic utilization of resources and environmental protection. It involves technology and equipment of energy conservation and environmental protection; etc, the extensibility of the industry chain is strong and its coverage area is broad. With the demand of industrial upgrading, and the foundation of the basic work of energy conservation, and the gradual perfection of the service system of energy conservation, as well as the establishment of anti-driving mechanism of national emission reduction target in 2020, we will witness an accelerated development period of the Chinese energy conservation industry market over the next 5-years.

Science Times: What are the problems facing the development of the Chinese energy conservation industry?

Mr. Jon Li: Let me summarize 8 points here.

The first is that the system of national regulations on energy conservation has been established, but the regulation system of the detailed implementation of standards and management mechanisms are not perfect. Government departments lack coordination mechanisms in the management of energy conservation.

The second is that supervisory mechanisms in many cities are newly established, the systems are not perfect and staff are not enough, and they cannot complete the comprehensive supervision work of energy conservation. At the same time, most people do not have practical experience of the field and lack the means and abilities to check the technology of energy conservation.

The third is that the law enforcement of energy conservation supervision is inadequate. Many energy consumption organizations do not have strong energy conservation consciousness, and they even wave aside the proposals on mandating to modify from the energy conservation supervision departments of their unreasonable energy consumption behaviors, the constraints of relative laws of energy conservation on energy consumption organizations are not enough, while energy conservation supervision departments lack means to further restrict.

The fourth is that the capabilities of monitoring energy conservation in different parts of China are not strong, and it is difficult to effectively monitor the key energy consumption organizations, the coordinating mechanism of monitoring and law enforcement supervision has limitations, and energy consumption organizations can not adjust its behaviors as quickly as possible when problems are disclosed through monitoring.

The fifth one is the deficiency of the specialized personnel of energy conservation, especially the basic personnel of energy conservation lags behind practical application, no special human resources, and no administrative measures to periodically train the persons in charge of energy conservation and managers.

The sixth one is to further need to direct the service chain of energy conservation through the process of practical advancing for various situations. Governmental financial support for technology service of energy conservation is inadequate, and this can hardly arouse the enthusiasms of energy consumption organizations, since it is difficult for technology service organizations of energy conservation to popularize its technologies. There are many handicaps to popularizing the Energy Performance Contracting, including the lack of knowledge on the mechanism of Energy Performance Contracting, limited substantial work done by banks and other financial institutions to promote the Energy Performance Contracting, and deficiency of qualified organizations which can measure and verify energy conservation.

The seventh is that the financial service system of energy conservation is not sound and this will prevent the market mechanism of energy conservation from operating effectively, and cannot fully exert its potential of energy conservation.

The last one is the lack of normalized propaganda of energy conservation in different parts of China.

Most of the problems mentioned above are from the government side,. Some cities are now strengthening the construction, like Beijing did in establishing on-line monitoring platforms and monitoring organizations of energy conservation and in cultivating the third party organizations to measure and verify energy conservation quantity. Shanghai is at the forefront of energy conservation.

Science Times: How do we promote the development of energy conservation industry in China?

Mr. Jon Li: First, we must strengthen the industrialization of scientific and technological achievements and advanced management means of energy conservation. Platforms for energy consumption organizations must be established, and new products, processes, and management modes of highly applicable energy conservation must be popularized.

Secondly, to promote the mechanism of energy conservation, we must especially popularize and to promote the mode of Energy Performance Contracting. We must also improve the capability of providing service of diagnosis, design, financing, reform, operation, and management of energy conservation for corporations and governments.

Thirdly, to solve the problems of the incongruity between measurement and verification of energy conservation that commonly existed in energy conservation service corporations, we must expedite the establishment of the third party energy conservation measurement and certification authorities, and form the independent evaluation and determination system. These are both very crucial to directing and standardizing the energy conservation markets.

In order to further promote the energy conservation work in China, currently, it there needs to be further directing and promoting of the transition and the transformation of the energy conservation mechanism to face the market. The necessary points are to first to promote the capacity building of energy conservation from government side, second to form good market supportive of Energy Performance Contracting, and third to support the service organizations of energy conservation industry from various angles which are the comprehensive capacity building of Energy Performance Contracting service corporation. All of these are necessary points for the future of the industry and cannot be omitted.

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