World Resources Institute WRI

China’s booming energy efficiency industry

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Courtesy of World Resources Institute WRI

China’s energy efficiency industry is emerging as a high growth sector with the country projected to spend as much as Rmb2.1 trillion (USD300 billion) over the next five years on products and services that cut energy use. The key drivers of this development are the Chinese government’s determination to curb the country’s expanding energy appetite as well as higher production and energy costs. Firms that develop cost-effective energy-saving technologies, particularly for the most energy-intensive industries, are poised to capture the opportunities. If successful, these enterprises will not only become profitable, but will also help lead China to a more sustainable energy future.

In the past few years, Chinese energy efficiency companies have been riding a wave of impressive growth. Zhuhai Huisheng Energy Technology Development Company – a manufacturer of integrated energy conservation systems for commercial properties - reported that its 2007 gross revenues topped Rmb35 million (USD5 million), a growth of over 300 percent from 2006. Xi’an Ruichi Metallurgical Equipment Company – a producer of regenerative power for smelting furnace systems – reported that its 2007 gross revenues reached Rmb30 million (USD4 million), an increase of 36 percent since 2006. Meanwhile, Beijing Sinen En-Tech Company – whose specialized industrial wastewater treatment technologies reduce energy and water consumption – reported that its 2007 gross revenues achieved Rmb100 million (USD14 million), growing 400 percent from 2006.

The biggest success however, is Beijing Shenwu Thermal Energy Company. As recently as 2004, the firm – which produces advanced energy-saving industrial combustion and heating furnaces – had annual gross revenues of less than Rmb40 million (USD6 million). In 2007, Shenwu’s gross revenues surpassed Rmb2 billion (USD286 million), with the company controlling 70 percent of the Chinese steel industry’s regenerative heating sector.

More important than just booming revenues, China’s energy usage as a whole appears to have become more effi cient. For the fi rst half of 2007, the Ministry of Environmental Protection announced that China’s energy intensity per unit of GDP fell by 2.78 percent – almost double the rate of decrease for the entire 2006 (see Box 1: China’s Challenge).4 Such improvements were especially true in some of China’s most energy-intensive sectors. For example, the China National Coal Association reported that the coal industry’s energy consumption5 in 2007 dropped by 10.89 percent compared to 20066 while its coal production for the fi rst eight months of 2007 increased by 11.23 percent compared to the same period in 2006.7

The recent energy efficiency advances are due to a combination of more aggressive government policies, higher energy and production costs as well as an increasingly competitive environment for Chinese energy-intensive firms. As a result, many firms are facing tightening profit margins and must find ways to cut costs. One desirable option - generate savings from decreased energy consumption. It is this need that is driving the current demand for energy efficiency technologies and services.

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