China's energy demand is rapidly growing as its economy continues to expand. In fact, China is the world's fastest growing consumer of power and, in 2004 alone, it added enough power plants to equal all of California's power generation. Power shortages, leading to blackouts throughout China and disrupting major municipalities and industrial production, are putting pressure on officials to make additional supplies of energy available to consumers. Unless action is taken to decrease the growing demand, China will need to add generation capacity equal to 22 Three Gorges Dam, including 150 gigawatts in new coal-fired capacity in the next five years. China produced over 2 billion tons of coal in 2005, nearly 45% of the world's total, and more than the US, Russia, and India combined. Over half of this coal is used to produce electricity and China is now building the equivalent of one large coal-fired power plant a week.

This staggering rate of growth will have substantial impacts on the environment not only in China but also in the US and around the world. China is likely to become the world's leading emitter of global warming gases in the near future. Pollution generated by its power plants cross the Pacific, resulting in mercury contamination of US fish and soils. Furthermore, according the NY Times, it can be expected that eventually up to one-third of the air pollution in California will originate in Asia.

In addition to the environmental impacts, China's growth is also causing tremendous pressure on world markets of oil and natural gas, raising energy prices and increasing global tensions.

China recognizes that it cannot continue to increase its energy usage at the same rate as its economic growth. Chinese leaders are publicly stating that the country needs to make fundamental changes to deal with the skyrocketing energy consumption. In fact, China has a declared goal of quadrupling its economy between 2002 and 2020, while only doubling its energy consumption. This government policy provides a rare opportunity to provide powerful environmental improvements while developing a solution to an economic problem.

China has invited the Alliance to provide technical support and guidance to help them achieve their energy efficiency goals.

Why It Matters

There are a number of reasons to be concerned about China's energy situation and, specifically, its need to meet the growing demand for additional sources of energy in light of the expanding economy.

Protecting the global environment: China is on track to become the largest polluter in the world, affecting global air quality and climate stability. Taking action now, ahead of the steep growth curve, provides a unique opportunity to provide new directions for meeting energy needs that will have less impacts on the environment.

Improving global access to energy efficient products: Implementing demand side management policies and programs will build a market in China for energy efficient products (such as household appliances, commercial heating and cooling units, and industrial motors), This will inevitably result in greater access, and reduced prices, for such products worldwide (resulting in global reductions in energy consumption and environmental damage).

Increasing energy reliability: Energy shortages have interrupted industrial and commercial operations throughout China. It is in the best interest of anyone with current or potential business in China to support efforts to improve reliability of energy supplies and reduce the likelihood of blackouts.

Furthermore, US-based utilities, industries, and government agencies have been leaders in developing programs and policies to improve energy efficiency and to provide incentives to industrial, commercial and residential users to minimize energy consumption. As global citizens, we should endeavor to share our knowledge and experience and, in particular, help China adapt these policies and programs as its economy expands.

China is one of the most promising areas in the world for significant advances in energy and environmental policies, with resultant global benefits. In fact, if China were to meet just 1/10 of its incremental electricity requirements with efficiency measures, it can avoid an average of 262 million metric tons/year of carbon emissions over the next five years. One-tenth is a modest goal given China's ambitions in this area, and the fact that since 1975 California has been able meet over 40% of its electricity needs using efficiency measures.

The Solution

The solution involves a variety of actions to improve energy efficiency and reduce dependence on coal and other fossil fuels.

This has been recognized by China’s leadership, which has established a goal to use efficiency to cut demand by 800 million tons of coal equivalent by 2020, even as China’s economy continues to grow.

One critical way to improve energy efficiency is through the use of “demand side management?(DSM) programs. The value of DSM has been proven; for example, over the past 20 years, DSM programs in California have helped to avoid the need to build an additional 20 new power plants.

DSM involves utility-sponsored programs providing incentives to customers to afford and use energy efficient technologies. Such technologies include: residential appliances and air conditioners; commercial lighting, heating and cooling; and industrial motors.

The Alliance is working closely with national and provincial decisionmakers in China to help fashion DSM programs that are appropriate for local conditions. In particular, we are helping to identify opportunities for substantial energy savings through efficiency and to develop specific DSM programs that would best capture these opportunities in a way that works effectively with the local utilities. The Alliance has a Technical Advisory Group (TAG), with key experts on energy efficiency and China energy issues, to help ensure that Alliance projects are designed to achieve the maximum possible levels of efficiency taking into account technical, financial, and political parameters.

With the strong support of California officials, and building on the experience gained by utilities in California and elsewhere in the US, the Alliance is well-placed to work cooperatively with Chinese officials to develop successful DSM programs. In fact, the State of California has entered into a cooperative agreement with its sister province (Jiangsu) related to energy efficiency, with the Alliance as an implementing partner.

Commissioners from the California Public Utilities Commission and the California Energy Commission have joined other leading experts as members of the Alliance Leadership Council. Furthermore, all three investor-owned utilities in California have joined the Alliance in order to help share their experience with China. In particular, PG&E has worked closely with the Alliance, sharing DSM policies and programs, sending experts to China, and hosting visiting Chinese delegations.

The work of the Alliance is recognized by leaders in both China and the US (and elsewhere) as providing an extremely valuable contribution to the twin goals of reducing energy demand and improving the global environment. Therefore, key officials from relevant sectors in the US and China have agreed to participate in the Alliance Leadership Council (including Chinese governmental leaders with the influence and authority to implement the necessary changes in laws and regulations).

The Leadership Council is designed to provide guidance and support to the Alliance, specifically with respect to its goals and strategies, as well as its fundraising activities.

The Leadership Council currently includes:

From the US:

Susan Kennedy (Chief of Staff to California Governor Schwarzenegger, formerly Commissioner, California Public Utilities Commission)
Arthur Rosenfeld (Commissioner, California Energy Commission)
Dian Grueneich (Commissioner, California Public Utilities Commission)
Mark Levine (Vice Director, Lawrence Berkeley National Laboratory)
Steve McCarty (Director, Demand Side Policy, Planning and Analysis, Pacific Gas & Electric Company)
Gene Rodrigues, Director, Energy Efficiency, Southern California Edison Company
Doug Ogden (Vice President, Energy Foundation, Director, China Sustainable Energy Program)
Ashok Gupta (Director, Air & Energy Program, Natural Resources Defense Council)

From China:

Madame ZHAO Jiarong, Director General, Energy Conservation Bureau, National Development and Reform Commission (NDRC) (invited)
XU Zhimin, Deputy Director General, Economic Operations Bureau, NDRC (unofficial member)
WU Guihui, Deputy Director General, Energy Bureau, NDRC (invited)
HE Binguang, Deputy Director, Energy Conservation Bureau, NDRC (invited)
LI Xinmin, Deputy Director, State Environmental Protection Administration (invited)
SONG Mi, Vice Chairman, State Electricity Regulatory Commission (invited)
Madame GU Yufang, Deputy Director General, Jiangsu Provincial Economic and Trade Commission
LE Jingpeng, Deputy Director General, Shanghai Municipal Economic Commission
CHEN Jinhai, Director, Energy and Resource Efficiency Department, Shanghai Municipal Economic Commission
Madame CHEN Rumei, Director, Shanghai Municipal Energy Conservation Supervision Center
XU Hang, Director, East China Electricity Regulatory Commission
YANG Kun, Director, Guangzhou Electricity Regulatory Commission (invited)
CHEN Qing, Director, South-North Institute for Sustainable Development