SHANGHAI ASKS DOE FOR HELP CUTTING ENERGY USE

UNCLAS SECTION 01 OF 04 SHANGHAI 000541

SIPDIS

SENSITIVE
SIPDIS

STATE FOR OES AND EAP/CM
STATE PASS USTR FOR STRATFORD/WINTER/MCCARTIN/ALTBACH/READE
CEA FOR BLOCK
USDOE FOR MIZROCH/CHIANG/GINSBERG
USDOE FOR INTERNATIONAL/PUMPHREY AND GEBERT
USDOC FOR ITA/MAC DAS KASOFF, MELCHER AND MCQUEEN
TREASURY FOR DOHNER/SOBEL/CUSHMAN/MOGHTADER/WINSHIP
TREASURY FOR WRIGHT AND AMB HOLMER
NSC FOR WILDER AND TONG

E.O. 12958: N/A
TAGS: ENRG SENV EINV EIND CH
SUBJECT: SHANGHAI ASKS DOE FOR HELP CUTTING ENERGY USE


(U) This cable is sensitive but unclassified and for official
use only. Not for distribution outside of USG channels or via
the internet.


1. (SBU) Summary: A Department of Energy delegation led by PDAS
John Mizroch met with municipal officials, academics, and U.S.
businesses during its August 16-17 visit to Shanghai.
Shanghai's inefficient energy consumption limits its economic
growth and contributes to its pollution problems. Shanghai
hopes to cut energy consumed per unit of GDP by 20 percent in
time for the 2010 World Expo. Areas identified by the
delegation and its official interlocutors for future discussion
and cooperation include industrial energy consumption
assessments, bio-fuels, and energy efficient buildings. U.S.
companies are keenly interested in providing their technological
solutions to energy efficiency problems, but note that Chinese
businesses would need to stop focusing on initial price without
regard to long-term savings before their products would be
competitive. End summary.


2. (SBU) Department of Energy (DOE) PDAS John Mizroch led a
delegation to Shanghai August 16-17. He was accompanied by DOE
Office of Technology Advancement and Outreach Director Amy
Chiang, DOE Office of Energy Efficiency & Renewable Energy
Senior Executive Board Member Mark Ginsberg, DOE Office of
Energy Efficiency Social Scientist James Quinn, Oakridge
National Laboratory R&D Staff Member Michaela Martin and TMS,
Inc. Consultant Alan Gagnet. The purpose of their trip was to
discuss areas of cooperation and collaboration on bio-fuels,
green buildings and industrial energy efficiency with Shanghai
government and academic officials. The delegation also hosted a
roundtable of U.S. business leaders in Shanghai to discuss DOE
assistance in promoting U.S. technologies in China.

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Shanghai Development and Reform Commission
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3. (SBU) On August 16 the delegation met with Shanghai (SHDRC)
Chief Economist Zhou Ya, SHDRC Planning Department Yang Hongwei,
and SHDRC Department of Energy Development Acting Director Zhang
Lihong. Zhou made it clear from the beginning that the SHDRC
viewed this meeting as an introductory meeting and not one that
would have specific outcomes. Their interest in working with
the DOE on energy efficiency issues was clearly piqued, however,
as soon as the delegation mentioned their productive meetings
with the Beijing Development and Reform Commission.


4. (SBU) Zhou said that by July 2007 Shanghai's annualized GDP
growth had reached 13 percent. In 2006, Shanghai's GDP was RMB
1.28 trillion (USD 169 million) and to produce this output,
Shanghai consumed 89 million tons of coal equivalent (TCE) worth
of energy. Of this energy consumption, 37 percent was used by
the iron/steel and petrochemical industries.


5. (SBU) Zhou said that Shanghai had just established an energy
efficiency working group, led by Shanghai Mayor Han Zheng, to
achieve the 20 percent reduction in energy consumption per unit
of GDP called for by the Central government by 2010. This
working group's first meeting was August 16.


6. (SBU) Zhou and PDAS Mizroch discussed three areas for future
cooperation: 1) The design and construction of a
green/zero-energy building for display at the 2010 Shanghai
World Expo; 2) Energy savings in government-invested public
buildings such as hospitals; and, 3) Zhangjiang High-tech Park.
Ms. Zhang Lihong was designated at the point of contact for
future discussions.

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SHANGHAI 00000541 002 OF 004


Shanghai Economic Commission
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7. (SBU) The delegation met with Shanghai Economic Commission
(SHEC) Vice Director Gao Yun and SHEC Deputy Director Li Yunhu
on August 16. Gao noted that the SHEC appreciated its ongoing
cooperation with the United States on energy savings and
efficiency.


8. (SBU) Shanghai's energy consumption growth has been averaging
8 percent per year and Shanghai, said Gao. Since 61 percent of
Shanghai's energy consumption was used by industry, the SHEC had
focused on increasing industrial energy efficiency. Towards
that end, in 2006 the SHEC closed 500 "high energy consuming and
polluting" factories for a savings of 500,000 TCE. By the end
of 2007, Gao said that the SHEC would have closed down an
additional 600 of these factories. He estimated this would
result in an additional one million TCE in savings. These
factories were largely small-scale operations and included both
private and state/city-owned enterprises. They were targeted
for closure based on their energy use and pollution produced;
they were given the option of changing their production
techniques or products to lower their energy waste, or to
re-develop the land the factory occupied into residential or
commercial buildings.


9. (SBU) The SHEC had also identified the 79 largest industrial
consumers of energy. These 79 companies consumed 75 percent of
all the energy used for industrial purposes -- roughly 50,000
TCE per company per year. These steel, petro-chemical and IT
companies have been instructed to compare their energy use with
that of other similar companies. Two-thirds of these companies
were state- or city-owned enterprises. Gao asked that the DOE
provide industry-specific energy consumption benchmark data to
assist them in evaluating these companies. PDAS Mizroch also
offered to assist SHEC in conducting energy-use audits of these
firms as the DOE has been doing in the United States.


10. (SBU) Shanghai's growing service sector currently consumed
30 percent of Shanghai's energy consumption. The remaining nine
percent was consumed by residential users. Gao said that there
were 2.4 million vehicles on Shanghai's roads. Two million of
these were registered in Shanghai, which has limits on the
numbers of vehicles registered per month; the other 400,000 was
an estimate of the numbers of cars based in Shanghai, but
registered elsewhere.


11. (SBU) Gao asked that the DOE provide technical and policy
advice on the areas of circular economy and energy efficiency.
He hoped that the DOE could provide technology to help
Shanghai's businesses overcome the inefficient use of energy.
Gao requested that the DOE continue providing assistance to
retro-fitting the Shanghai Automobile Museum to make it more
energy efficient. He also suggested the possibility of
collaborating to design a zero-energy Youth Exhibition Center to
showcase environmentally friendly technologies.

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Shanghai Energy Conservation Supervision Center
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12. (SBU) The delegation met with Shanghai Energy Conservation
Supervision Center (SECSC) Director Chen Rumei, SECSC Vice
Director Lou Zhenfei and SECSC Senior Engineer Wu Mei on August

16. The SECSC, a division of the SHEC, had primary
responsibility for conducting energy consumption audits and
analysis and providing policy suggestion to the SHEC and SHDRC
for energy efficient policies that comply with Chinese national
standards and laws. Most of its staff was engineers. The SESCS
provided training for Shanghai officials and industrial leaders

SHANGHAI 00000541 003 OF 004


on techniques to reduce energy consumption. The DOE and SECSC
have a longstanding cooperative relationship. The DOE assisted
in the development of the SESCS's top-notch exhibition on energy
saving technologies and techniques.

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Industry Roundtable
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13. (SBU) On August 17, the delegation briefed more than 30
representatives of 20 American companies in China on the goals
of DOE delegation to China. Representatives from the following
companies were in attendance: Honeywell, Foster Wheeler, PIM,
URS China, Johnson Controls, Rockwell Automation, Dupont,
Mammoth China, Owens Corning, Optimira Energy, Sloan, Trane, DE
Global, Eco Energy Cities, Eclipse, Maxon, Squire Sanders LLP,
Joint U.S.-China Cooperation on Clean Energy, the U.S.-China
Business Council, and the American Chamber of Commerce. PDAS
Mizroch emphasized that DOE's goal was to assist American
companies market and sell their energy-saving technologies in
China.


14. (SBU) Eclipse Vice President John Searles noted that Chinese
companies placed greater importance on a machine's initial
purchase price rather than long-term savings that might be
gained from a more expensive, but more efficient alternative.
Other industry representatives agreed and said that there would
need to be a "cultural change" in how Chinese manufacturers
viewed industrial purchases. Owens Corning General Manager of
Energy Solutions Tom McCawley emphasized the importance of
educating consumers through the "change management" process.
Delegation member Gagnet suggested that companies consider
taking their energy savings technology on a road show with to
concretely demonstrate the savings gained.

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Shanghai Science and Technology Commission
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15. (SBU) Shanghai Science and Technology Commission (SHSTC)
Social Development Department Director Ma Xingfa, SHSTC
International Cooperation Director Fu Guoqing and SHSTC Program
Officer Song Yang met with the delegation on August 17. Ma told
the delegation that 21 of Shanghai's 23 power plants were
coal-fired. These plants used 13 million tons of coal per year.
His office was working on a plan to close down the smallest,
most inefficient power plants in order to reduce carbon dioxide
emissions by 2.4 million tons and save one million tons of coal
per year.


16. (SBU) Ma said that in 2006, for every RMB 10,000 (USD 1,325)
of GDP, Shanghai consumed 0.87 TCE. Shanghai's energy structure
created a "bottleneck" for Shanghai's continued economic growth
since energy consumption and economic activity were closely
related. Increased efficiency in the use of energy would allow
Shanghai to continue its economic expansion. At this point, Ma
said, lack of access to energy was acting as a brake on
Shanghai's economic development.


17. (SBU) Ma welcomed the DOE's assistance in the development of
Shanghai's Clean Energy Resource Center. This entity was
created in May 2006 and currently occupied space in an office
building in Shanghai's Minhang District. The SHSTC planned to
construct its own office building soon and agreed to further
discussions with the DOE on how to design it as a zero-energy
consuming facility.

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Shanghai Jiaotong University Energy Research Institute
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SHANGHAI 00000541 004 OF 004




18. (SBU) On August 17, the delegation met with Shanghai
Jiaotong Univerisity (SJTU) Energy Institute Director Huang Zhen
and SJTU Energy Research Institute Professor Yu Lijun.
According to Huang, SJTU's Energy Research Institute had 53 full
professors and 64 associate professors working in its
laboratories promoting interdisciplinary research on energy and
environmental solutions. The institute was founded in 2005.


19. (SBU) One of the institute's roles was conducting industrial
energy audits and assessments. DOE's Ginsberg suggested that
one possible area of cooperation would be to coordinate the
translation of the DOE's industrial assessment software tool
into Chinese for use in China. The two sides also discussed
bringing an American academic team with experience in conducting
DOE industrial assessments to work with SJTU in its future
assessments.


20. (U) The delegation cleared on this report.
JARRETT