Energy Efficiency in China: Glorious History, Uncertain Future Mark D. Levine Senior Staff Scientist Founder and Leader, China Energy Group April 21, 2010
The China Energy Group at LBNL The China Energy Group works collaboratively with groups in China and elsewhere: to promote energy efficiency in China, to enhance the capabilities of Chinese institutions that promote energy efficiency, and to understand the dynamics of energy use in China.
Founded in 1988 Focused on End-Use Energy Efficiency ~ 40 Current Projects in China Collaborations with ~50 Institutions in China
Mark D. Levine Group Leader, Senior Staff Scientist David Fridley Deputy Group Leader Staff Scientist Nan Zhou Scientist Nate Aden Senior Research Associate Lynn Price Staff Scientist Nina Zheng Research Associate Hongyou Lu Senior Research Associate Ali Hasanbeigi Post Doc Yining Qin Post Doc Shuqin Chen Post Doc Jing Ke Stephanie Ohshita Visiting Researcher Visiting Faculty Queena Qian Visiting Researcher
Three Major Achievements Appliance Efficiency Standards Industrial Energy Efficiency Policy Instrumental in creating two major institutions China Sustainable Energy Program of the Energy Foundation Beijing Energy Efficiency Center
Part I: Glorious History preceded in good dialectical fashion by an inglorious earlier history Part II: Energy Crisis in China: 2001 to present repeat of much earlier inglorious history?? Part III: The Future: What might happen? What is to be done to end the crisis?
Executive Summary (Part I) Things were bad in energy (for 3 decades) Deng Xiaoping came to power A group of academics suggested a new approach to energy Deng listened! Things were much better (for 2 decades) The market became king Energy went off track again There are solutions The Chinese government and Communist party are responding, somewhat in the manner of Deng 7
Part I: China s Recent Energy History in Three Acts Soviet Style Energy Policy (1949-1980) Deng s Initial Reforms (1981-1992) Transition Period (1993 to 2001), then Crises 8
Soviet Style Energy Policy (1949-1979) Single objective was rapid energy supply growth Energy prices greatly subsidized Central allocation system provided energy primarily to heavy industry No attention to environment Result: one of the world s least efficient (and fastest growing) energy systems Source: NBS 9
Primary Energy Use vs GDP Index, 1952=100 1952-1980 1,400 1,200 1,000 800 600 GDP Energy 400 200 0 1952 1954 1956 1958 1960 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 LAWRENCE BERKELEY NATIONAL LABORATORY
Deng s Initial Reforms (1980-1992) Key meetings among more than 100 academic energy experts in 1979 and 1980 stated: 0.75 China energy policy in crisis need for radical reform major changes identified: (1) energy price reform, and (2) serious attention to energy efficiency Government quickly implemented reforms in Sixth Five-Year Plan (1981-1985) tce/thousand 1995 yuan GDP 0.5 0.25 Energy Intensity of China's Economy, 1952-1992 0 1950 1955 1960 1965 1970 1975 1980 1985 1990 Source: NBS 11
Primary Energy Use vs GDP Index, 1980=100 1980-2000 700 600 500 400 300 Energy GDP 200 100 0 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 LAWRENCE BERKELEY NATIONAL LABORATORY
Energy-conservation policies & measures in Phase II Energy Management factory energy consumption quotas factory energy conservation monitoring efficient technology promotion close inefficient facilities controls on oil use Financial Incentives low interest rates for efficiency project loans reduced taxes on efficient product purchases incentives to develop new efficient products monetary awards to efficient enterprises R D & D funded strategic technology development funded demonstration projects Information Services national information network national, local, and sectoral efficiency technical service centers Education & Training national, local, and sectoral efficiency training centers Energy Conservation Week school curricula 13
Energy efficiency investment is stable, but declining as share of total investment Investment (billion 1995 yuan) 300 200 100 Energy Supply and Energy Efficiency Investment, 1981-1998 Energy Supply Investment Energy Efficiency Investment Efficiency Share of Total Energy Investment Estimated Efficiency Share, 1996-1998 15% 10% 5% Share of Total Investment 0 1981 1986 1991 1996 N.B. Only partial data on energy efficiency investments after 1995 are available. These partial data informed the estimates presented here of efficiency's shares of total energy sector investment for 1996-1998. All investment data are for state-owned units only. 0% Source: NBS, SPC 14
China s CO 2 emissions would have surpassed the US before 1990 if energy intensity had not declined Mt Carbon 1600 1400 1200 1000 800 600 Carbon Dioxide Emission Estimates: USA Former Soviet Union China 400 Japan 200 India 0 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 Source: ORNL 15
Transition period (1993 to 2002) Rapid movement towards market-based system Dramatic energy price reforms (raised all energy prices to consumers) Enterprise reforms increased price sensitivity but past successes in improving energy efficiency were based on mechanisms that were disappearing Elimination of energy quotas Low incentives for monitoring in industry Difficulty in continuing energy efficiency loan subsidies New tax code (1994) eliminated tax breaks for efficiency 16
Take-off of consumer goods highlights the need for efficiency standards 15 Production of Consumer Durables, 1980-1999 Air Conditioners Output (millions) 10 5 Refrigerators Motor Vehicles 0 1980 1985 1990 1995 Source: NBS 17
Appliance Saturation 140 Ownership: Number of Units per 100 Urban Households 120 100 80 60 40 Clothes Washers Color TVs Refrigerators PCs Room Air Conditioners 20 0 Cars 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 Rural households lag urban households by 10-20 years LAWRENCE BERKELEY NATIONAL LABORATORY
Part II: Energy Crisis in China: 2002 to present repeat of much earlier inglorious history??
Executive Summary (Part II) China faced a serious new energy crisis Through 2005, most Chinese saw the energy shortage as the crisis The real crisis was in energy policy and much too-rapid energy demand growth (just as in 1979) A key issue: how does China reduce energy demand growth and still meet requirements for energy services? Unless this problem is solved, China s economic goals will be placed in jeopardy and the environmental consequences of energy policy failure are truly frightening 20
Energy crisis: 2002-2005 and beyond Energy demand growing very, very fast Widespread power shortage; extraordinary pace of construction of power plants Soaring coal prices Transportation bottlenecks for coal Surge in oil imports especially as oil is used in place of coal 21
China Adds 2 power plants per week 101 GW added in 2006 92 GW coal-fired Comparable additions in 2007 and 2008 Annual additions ~ the combined capacity of UK and Thailand or twice California s capacity
China s Energy and Development Goals for 2020 Goals (compared with 2000) GDP -- Quadrupling Urbanization -- 65% vs 35% now Energy Use -- Doubling By 2005, it was already clear that the goal could not be realized. 23
Overview: Energy Intensity Trends and Policy Background Average Annual Decline of 5% per year Quadruple GDP/Double Energy Strong efficiency mechanisms in 1980s Weakening of efficiency mechanisms Increased rate of urbanization Average Annual Increase of 5% per year China joins WTO China announces 20% E/GDP reduction target for 2010 24 Source: National Bureau of Statistics, China Statistical Abstract, various years. Zhou, N., Levine, M.D., and Price, L., in press. Overview of Current Energy-Efficiency Policies in China. Invited for a Special Issue of Energy Policy.
Coal Use & Energy-Related CO2 煤炭消费与能源相关二氧化碳排放 500 400 300 200 100 China s Steel Production 1990 2007 China s Cement Production 1990 2007 中国的钢铁生产量 (1990-2007 年 ) 中国的水泥生产量 (1990-2007 年 ) 1,400 1,200 1,000 800 600 400 200 0 1990 1995 2000 2005 0 1990 1995 2000 2005 Million Metric Tons 百万吨 Source: China Iron and Steel Association; Institute of Technical Information for the Building Materials Industry; U.S. Geological Survey 数据来源 : 中国钢铁协会 ; 建筑材料工业技术情报研究所 ; 美国国家地质调查局
Cement Production Worldwide: 2007 世界水泥生产量 2007 其他国家 Rest of World 26% 墨西哥 Mexico 2% 意大利 Italy 2% 土耳其 Turkey 2% 西班牙 Spain 2% 俄罗斯 Russia 2% 韩国 Rep of Korea 2% 日本 Japan 3% United States 4% (includes Puerto Rico) 美国 ( 包括波多黎各 ) India 6% 印度 中国 China ~50% Source: U.S. Geological Survey 2008. Mineral Commodity Summaries: Cement; China National Bureau of Statistics, 2008 资料来源 : 美国地质调查局 2008 年 矿产品摘要 : 水泥 ; 中国国家统计局 2008 年数据
源消费(十亿吨标准煤)国内生产总值目标能Energy Consumed (billion tce) 2.7 2.4 2.1 1.8 1.5 1.2 0.9 0.6 0.3 Actual GDP 实际国内生产总值 Energy and GDP, Path to 2020 中国的能源消费与国内生产总值 ( 至 2020 年 ) Actual energy 实际能源消费 energy target 能源目标 GDP target 0 0 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 Source: NBS, China Statistical Yearbook, various years; China Statistical Abstract 2005; growth estimates extrapolated from mid-year production data for 2005; targets announced by NDRC 数据来源 : 中国国家统计局, 中国统计年鉴 ( 各年 ); 中国统计摘要 (2005);2005 年增长数据是基于 2005 年年中生产数据通过插值方法得到的 ; 目标基于国家发展与改革委员会公布的数据 36 32 28 24 20 16 12 8 4 国内生产总值( 千亿2000 年人民币元) GDP (trillion 2000 RMB)
Figure 3: Global, Chinese, and American Per-capita Energy-Related CO 2 Emissions, 1950-2004 25 tonnes CO2/person 20 USA 15 10 5 global average 0 PRC 1950 1956 1962 1968 1974 1980 1986 1992 1998 2004 Source: China emissions are derived from revised total energy consumption data published in the 2007 China Statistical Yearbook using revised 1996 IPCC carbon emission coefficients by LBNL; China population data from NBS and US Census (for 1950-51); global and American emissions data from Oak Ridge National Laboratory, Carbon Dioxide Information Analysis Center; global and American population data from US Census.
Energy intensities within industrial subsectors are actually declining 2.0 1.8 1.6 smelting & rolling of ferrous metals kgce/rmb (2000) 1.4 1.2 1.0 0.8 non-metal min prod smelt & roll n-f m petroleum, coke, & nuke raw chemicals & ch pr 0.6 0.4 0.2 textiles paper electricity coal 0.0 1995 1996 1997 1998 1999 2000 2001 2002 2003 Environmental Energy Technologies 4/22/2010, p. 29
Part III: The Period after 2005
Executive Summary (Part III) Things could get worse Actually they can t, but they could continue on the present path for some time Things could get better There is some chance!! Update: things are getting better 31
China s Policies to Reduce Energy Use and Greenhouse Gas Emissions Major policy initiatives were introduced in 2005 to reverse the trends in energy demand growth experienced from 2002 to 2005 32 32
In 2005, China Adopted an Energy Intensity Reduction Target November 2005: Premier Wen Jiabao at the Plenary of the Communist Party: Energy use per unit of GDP must be reduced by 20% from 2006 to 2010 March 2006: Statement reiterated by the National Peoples Congress China s 11th Five Year Plan (2006-2010): outlined goal of reducing energy consumption per unit of GDP by 20% between 2006 and 2010 33 33
Responsibility for Achieving 20% E/GDP Reduction Target Varying targets have been assigned to all the provinces, cities and counties in China to achieve the national energy conservation target Each province signed an agreement with China s State Council outlining their specific targets for energy conservation (both for the Five Year Plan and annually) Lower level governments in turn signed agreements with provincial governments 34 34
Responsibility for Achieving 20% E/GDP Reduction Target State Council established a personnel evaluation system to enforce the achievement of the target: Officials from that do not meet energy conservation reduction targets cannot participate in annual rewards programs or receive honorary titles Officials will not be promoted if their jurisdiction fails to meet energy conservation targets (one-vote veto) Leaders in state-owned or state-controlled companies will not enjoy the benefits of annual evaluation award programs Provincial governments and companies are subject to the evaluation jurisdiction s high energy-consumption projects followed by an investigation by administrative bodies Deception in the reporting of results can lead to criminal charges 35 35
Reducing Energy Use in the Industrial Sector China s national-level government established the Top-1000 Energy- Consuming Enterprises Program Provincial and local governments signed agreements with about 100,000 smaller companies All companies using more than a certain threshold level of energy annually agreed to develop energy conservation targets and action plans 36 36
Top-1000 Enterprises Represent a Significant Share of China s s Energy Use Total energy savings goal for all Top-1000 enterprises is 100 Mtce (2.8 Quads) from their expected 2010 energy consumption. 2,500 Agriculture Primary Energy Consumption 2005 (million tce) 2,000 1,500 1,000 500 Transport Commercial Residential Industry Ethylene Ammonia Glass Paper Aluminium Cement Iron and Steel 33% of total energy Other Industry 45% of industrial energy Note: Top-1000 program energy consumption is typically reported in final energy units (dark blue box). The shaded area provides the Mtce equivalent of electricity generation, transmission, and distribution losses so that the Top-1000 program can be compared in primary energy terms with the other two bars. Industry sub-sector breakdown based on LBNL LEAP model, not Chinese statistics. 37 - Note: Mtce >> EJ = 0.0293; EJ >> Quads = 0.9478 Total Industry Top-1000 Enterprises 37
Rapid growth China's energy efficiency investment Feb. 18, 2010: The gross output of China s energy efficiency services industry increased 40.8% year on year to RMB 58.8 billion($8.8 B) last year (2009), according to statistics released by the China Energy Conservation Association. Last year, the government's comprehensive energy-saving investment was RMB 36.0 billion ($5.3B), up 42.3% from RMB 25.3 billion ($3.7 B) in the previous year. The government incentives drew forth 100 B RMB ($14.7 B) investment from industry Investment in energy performance contracting in China surged 67.4% year on year to RMB 19.5 billion ($2.9 B) last year. http://www.chinaknowledge.com/newswires/news_detail.aspx?type= 1&NewsID=31392
Comparison with Wind and Nuclear Investments Very rough estimates of investment in wind and nuclear: Wind: 10 GW/yr x RMB 4 billion/gw = RMB 40 billion/yr Nuclear 7 GW/yr x RMB 14 billion/gw = RMB 100 billion/yr Energy efficiency is presently >RMB 150 billion ($22B)/year and growing rapidly!
Electric Power Sector Policies China has adopted a number of innovative policies that aren t found in most countries Differential pricing sets electricity prices for energy-intensive sectors based on energy efficiency and has resulted in thousands on inefficient plants being closed Environmental dispatch means low carbon and clean plants are dispatched first Energy Efficiency Power Plants (EPPs) are virtual power plants made of energy efficiency projects China has EPP pilots in 5 provinces Grid-connected renewable energy with preferential feed-in tariffs (60% higher than that for coal-fueled power generation) 40
Low Carbon Energy Sources Renewable Energy Renewable Energy Law enacted in 2006 National targets: 10% of total primary energy in 2010 will be from renewable energy, increasing to 15% by 2020 Wires charge for Renewable Energy fund doubled to 0.03 cents/kwh More than 170 GW of hydro power has been commissioned; expected growth of about 300 GW by 2020, and 400 GW by 2030 Largest producer and user of solar water heaters in the world with over 120 million square meters of solar heat collectors in use, saving 20 million tons of coal per year Largest producer of PV cells for the world Aggressive new solar PV incentives announced in April 2009 Ambitious nuclear power development plan More than 60 GW new nuclear power plants will be constructed and commissioned by 2020 Advanced nuclear power technology being introduced 41 41
Recent Achievements in China With these strong policies and programs, China has been able to reverse the increase of energy use per unit of GDP and has made remarkable progress in improving the country s s energy efficiency, reducing energy-related related GHG emissions at the same time
Current Situation Energy Efficiency Programs - 11th Five Year Plan Top-1000 Program Goal: savings of 100 Mtce in 2010 2009: program has reached goal of 100 Mtce savings (~ 250 MtCO2) Ten Key Projects Boiler retrofits, CHP, waste heat recovery, motor systems, green lights, government procurement, etc. Goal: savings of 250 Mtce in 2010 Buildings Energy Efficiency Mininum efficiency standards, efficiency retrofits, heating system reform, energy management Goal: savings of 100 Mtce in 2010 Appliance Standards and Labels ~ 30 minimum efficiency standards, plus energy efficiency labels 80 Mtce savings will be realized during 11 th FYP Small Plant Closures 13 industrial sectors Goal: savings of 118 Mtce by 2010 43 Source: Levine, M.D., Price, L., Zhou, N., Fridley, D., Aden, N., Lu, H., McNeil, M., Zheng, N., Qin, Y., Yowargana, P., in press. Assessment of China s Energy-Saving and Emission-Reduction Accomplishments and Opportunities During the 11th Five-Year Plan. Berkeley, CA: Lawrence Berkeley National Laboratory.
Recent Achievements in China Economic growth and energy consumption decoupled Energy intensity decreases 1.69% in 2006 3.66% in 2007 4.59% in 2008 20% energy/gdp target will be difficult to meet because of increase in heavy industry in 2009; however, China is likely to achieve 17%-19% reduction. 44 44
Current Situation 1980-2002: Average Annual Decline of 5% per year 2006: 1.8% Decrease 2007: 4.04% Decrease 2002-2005: Average Annual Increase of 5% per year 2008: 5.2% Decrease 45 Source: National Bureau of Statistics, China Statistical Abstract, various years.
The story will be continued, as China pursues all avenues to meet its demand for energy services while continuing its policy of aggressively promoting energy efficiency
Myths and Realities about Energy and Energy-Related CO 2 Emissions in China
Motivation for Discussion of Myths 讨论有关中国迷思的原因 Co-operation between the U.S. and China on reducing CO 2 emissions is essential 中美之间的合作对降低 CO 2 排放是至关重要的 This requires trust between the two countries 这种合作需要中美之间的信任 Mistrust of China in the United States on the topic of climate change is fueled by rampant misinformation 大量的错误信息加剧了中美之间在气候变化问题上的不信任 Thus, dispelling these myths is of high importance 因此, 打破这些迷思是非常重要的
Myth: China s subsidized energy prices give firms a competitive edge 迷思 : 中国对能源价格的补贴将给公司竞争优势 Reality: China s energy prices are mostly at international levels or higher 现状 : 中国的能源价格几乎处于国际水平或者更高 2000 = 100 200 180 160 140 120 100 80 60 40 20 0 Index of Industry and Energy Prices 工业和能源价格指数 Overall Industry Power Coal Petroleum 整体工业电力 煤炭石油 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 Residents of Guangzhou pay more ($0.16/kWh) for electricity than residents of San Francisco 广州的居民电费 ($0.16 美元 / 度 ) 比旧金山居民电费更高 Natural gas prices in Shanghai are the same as in San Francisco ($10/mcf) 上海的天然气价格与旧金山的天然气价格相同 ($10 美元 /1000 立方英寸 ) Coal prices in China ($147/t) are now higher than in the US 中国的煤炭价格 ($147 美元 / 吨 ) 比美国的价格更高
Myth: China is profligate in its use of energy and becoming more so 迷思 : 中国挥霍地使用能源并变得更加浪费 Reality: Per capita energy use in China is only 1/8 U.S. & 1/4 EU 现状 : 中国的人均能耗量仅为美国的 1/8, 和欧盟的 1/4 均百万BTUs 美国西欧中国人
Myth: China is hogging the world s oil imports 迷思 : 中国正在抢夺世界的石油进口资源 Reality: China s imports, while growing, remain a very small part of traded oil on world markets 现状 : 中国的石油进口, 虽然在增长, 仍然仅为世界石油贸易市场上的一小部分
Myth: China s vast consumption of coal dwarfs any global attempt to address climate change emissions 迷思 : 中国大量的消耗煤炭使得全球任何减缓气候变化的努力大大降低 Reality: On a per capita basis, China consumes just slightly more than half as much coal as the U.S.! 现状 : 在人均水平上, 中国消耗的煤炭仅为美国水平的一半多一点! 人均煤炭消耗(吨石油当量/ 每人)
THE END (almost)
The Reason for My Optimism: Skills Only Found in China Environmental Energy Technologies 4/22/2010, p. 54
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