Sadly, this is the final chapter in our China and America blog series. We hope you enjoyed learning the many different aspects that make the U.S.-China relationship one of the most important in this day and age for the current global business climate. This especially holds true for the energy sector.
China's power sector is the fastest growing energy sector in the world, which at current rates of growth, will account for an estimated 16 percent of the increase in global energy demand to 2020. China's power sector has long had difficulties in keeping up with the country's skyrocketing economic growth. One of the reasons energy efficiency is such an important solution is because of China’s inefficient use of energy and raw materials. China’s energy consumption per unit of GDP in 2003 was 11.5 times that of Japan, 4.3 times more than the US, and nearly 4 times the world average. Thus, there is enormous opportunity to reduce the amount of energy and materials consumed. Energy efficiency allows factories to increase their output, and residential consumers to improve their standard of living, while reducing their electricity use and greenhouse gas emissions. It also allows for greater system reliability and reducing pressure on commodity prices. But efficiency isn't the only problem.
China is the world's largest producer and consumer of coal, using over 2 billion tons in 2008. As a result, China has 16 of the 20 most polluted cities in the world. Attaining the oil reserves it needs is also a tremendous concern for China. It may need to look elsewhere in the near future. If you look at the long term, it is very reasonable to predict that energy demand will double by 2050, because of urbanization, access to electricity, and an increase in the population. But, the classic oil and gas industry-what people normally refer to as easy oil, easy gas—is not enough to supply all that demand. A look at alternative energies may be the key for not only attaining enough resources, but helping the environment as well.
China has taken a step in the right direction. Nearly $100 billion in new spending on energy-related projects will have a huge impact in China. The country has already set an ambitious goal of cutting energy intensity(energy use per unit of GDP) by 20 percent by 2010. However there is a real lack of capacity to achieve these targets. This opens up enormous opportunities for foreign and especially U.S. companies offering energy efficiency services or technologies. But the U.S. have had their own problems.
Every president since Richard Nixon has vowed to reduce the United States’ dependence on foreign oil, yet none has succeeded. The U.S. believes that alternative energies are the key to China's and their own future. The U.S. program, meanwhile, has been criticized for the sluggishness with which its own policies are being implemented. Government loans and grants for renewable energy companies were included in the Obama Administration's economic stimulus plan passed in February, but the Department of Energy only released rules for applying for those programs last month.
One of these sustainable energies is wind. Wind is a capital-intensive, heavy manufacturing industry with long lead times, which is why despite everything 2008 was a record year and many installations have gone ahead in 2009. However, a big slowdown is expected soon as customers who have made downpayments on new turbines fail to get the financing needed to complete their orders. There is also a promise of a spike in demand of solar power from both the U.S. and China. That promise of a spike in solar demand from both the biggest and third biggest economies has fueled optimism among solar investors, but the market for solar panels is still mired in a deep oversupply and financing for renewable energy projects has yet to rebound from the financial crisis. J.P. Morgan analyst Christopher Blansett said it would be "2010 at the earliest" before the government loans boost demand for renewable energy projects in the United States.
China is still resisting a push to commit to targets for reducing greenhouse gas emissions and to open its market to U.S. clean energy technology. Despite huge gains in solar and wind technology, China still needs know-how in areas such as carbon capture, waste-heat recovery and concentrated solar. Beijing contends that the U.S. should share the technology if it truly cares about limiting climate change.
But American manufacturers worry that the transfer of research and development will lead to cheaper Chinese products flooding the market. By leveraging the tremendous American knowledge base in energy efficiency planning, design, engineering, monitoring and verification, this could be a very productive partnership with China’s energy efficient and carbon conscious future. If both sides are willing to give in a little.