Opportunities and costs, how to transition to a low-carbon economy?

Guests:

Zheng Shuanhu, Deputy Director of Beijing Energy Conservation and Environmental Protection Center, Senior Economist , Vice President

It is a fact that the emission of carbon dioxide leads to frequent occurrence of natural disasters. However, as the economy and population increase, carbon emissions seem inevitable. How to reduce the use of fossil energy while maintaining stable economic growth? Under such dual pressures, countries must be cautious about their "reduction commitments" on the Copenhagen negotiating table.

Enterprises as economic entities are also facing the strategic thinking of transitioning to a low-carbon economy. Corporate profits are constrained by energy costs, and the transition has the potential to reduce competitiveness and even threaten survival. Whether large enterprises or small and medium-sized enterprises, it is imperative to explore new models of sustainable development of enterprises. This dialogue invited three energy conservation and environmental protection experts from the government, enterprises and management consulting companies to discuss on-site how enterprises can adjust their own strategies and explore new market opportunities under the low-carbon economy situation.

How to define a low-carbon economy and what areas does a low-carbon economy include?

Zheng Shuanhu: The low-carbon economy was first proposed by the UK in 2003. At present, it is only a unified understanding at the national strategic level. It takes a process to truly turn an enterprise into the main body of the low-carbon economy. The low-carbon economy

is aimed at the traditional high-carbon economy, that is, the economy we are promoting based on fossil energy such as oil, natural gas, and coal. more than 65%.

In the long run, the transition to a low-carbon economy is an irreversible trend. However, from the perspective of the development law of the energy structure, it will take at least 50-100 years for a new energy source to rise to the dominant position accounting for more than 50%.

Zhan Jingtao: A low-carbon economy is an economic model with low energy consumption, low emissions, and low pollution. It may be more accurate for economists to define it. As an enterprise, we can only describe it according to our own circumstances. Literally speaking, it means little or no carbon dioxide emissions in the process of production and consumption. It includes two aspects, one is clean energy, and the other is efficient use of energy. Which industries will face the new industrial plan first?

Cheng Peng: Behind the low-carbon economy, the way of economic development leads people's consumption behavior to change. The three major industries are all involved in carbon emission problems, among which enterprises with high energy consumption and high pollution are more serious. At present, the energy industry is at the forefront. If the energy structure is to change, traditional fossil energy supply companies such as coal, petroleum, and chemical industry will face new industrial plans. Specifically, in the power industry, coal is currently used for most power generation in my country, and carbon dioxide emissions are very high. We should seek to use more nuclear, thermal, wind, and tidal energy to generate electricity. In addition, the transportation industry has to face re-planning. The growth of private cars brings a lot of exhaust emissions. Therefore, the development of public transportation and rail transportation is the future trend.

In the process of guiding industries to transition to a low-carbon economy, what will the government do?

Zheng Shuanhu: The role of the government in this process is to help the marketization of energy-saving products. Western countries also do this. For example, the government first conducts green procurement, and in the process, energy-saving technologies are scaled to gradually help industrial transformation. The OSRAM energy-saving lamps won the bid in Beijing last year, the market retail price is 18 yuan, the state financial subsidy is 50%, the Beijing financial subsidy is 30%, and the districts add another 10%. If you calculate the account carefully, this government subsidy is actually very cost-effective. An 11w energy-saving lamp can replace the traditional 60w incandescent lamp, and the energy consumption is reduced by 80%.

Beijing has launched 13.3 million lamps this year, and next year, energy-saving lamps will be used in all public places and residents' homes. After these measures are gradually advanced, it can be seen that the people's understanding of energy-saving lamps is definitely different from three years ago. This is a typical green consumption-led production.

Another example. We all know that the government is building power plants every year, and the investment in a power plant is in the billions of dollars, and it will emit emissions once it is built. If the money from the construction of the power plant is used to subsidize the citizens to buy lamps, high-efficiency motors and energy-saving transformers, and support for frequency conversion technology and ice storage, it will not only save energy, but also reduce emissions, and at the same time promote industrial development.

How are large companies transitioning to a low-carbon economy?

Cheng Peng: For traditional energy companies, in addition to improving energy utilization, they are also adjusting their business structure. Some of the big players I know, Shenhua, PetroChina, and Sinopec, are all considering how to transform. In the future, their business structure may no longer continue to develop coal and oil, but to participate in the development of new energy.

The traditional building materials industry is a major energy consumer, so finding new environmentally friendly building materials is the general direction. Now Vanke uses steel molds for casting, which has a longer service life than the original wooden molds. Although carbon is also consumed for smelting steel, the carbon consumption is still lower than that of wood molds when allocated to each casting. This is a small thing, but it is also a way of transitioning to a low-carbon economy. In addition, builders are also considering how to reasonably heat insulation and reduce carbon emissions through the energy saving of the building itself.

Zhan Jingtao: In the Siemens Beijing office building, except for individual offices and meeting rooms, lighting, air conditioners, and curtains are not switched on and off. They are automatically controlled by light-sensing, and the energy consumption of the entire building is comparable to that of the same level. Compared with the office building, the reduction is 28%-30%. The advantage of this building is that energy efficiency was already considered at the design stage, rather than being retrofitted after it was built. We also have an emission reduction target of 20% in Siemens factories.

Cheng Peng: The steel industry is a major energy consumer, and the state has repeatedly ordered to reduce energy consumption. Some steel mills are indeed making efforts in this regard. For example, steel needs to be cooled after smelting, and the heat generated during the cooling process can actually be collected and returned to the smelting step.

Zhan Jingtao: We have provided Baosteel with a COREX system. It does not traditionally use coke and ore to smelt steel, but directly reacts coal and ore together, which will greatly reduce carbon dioxide emissions. This is also a mode of reducing emissions in the production process.

What are the opportunities and costs of reducing emissions for companies?

Zhan Jingtao: From the perspective of cost investment, in order to save energy and reduce emissions, it is necessary to transform the original production process, add equipment for energy saving and emission reduction, and maintain it. As for whether the effect of energy saving and emission reduction is really achieved, some test equipment must be installed to monitor a series of environmental protection indicators.

The opportunities come from several aspects: First, the establishment of a green corporate image, the value of social responsibility and green image to the establishment of a brand, some knowledgeable entrepreneurs have long recognized; in addition, many energy-saving projects are There are certain income, and some income is relatively high. For example, a Siemens refinery renovation project in Shijiazhuang recovered the cost in one and a half years through energy saving. The energy consumption per unit product is reduced, the cost is also reduced, and the competitiveness of enterprises has naturally been improved.

Zheng Shuanhu: Some companies came to communicate with me and asked me what to do now? I think that, of course, as a business, you must pay attention to products, but at the same time, you must also pay attention to global trends and national policy orientations. If a trend is irreversible, it is only a matter of time. Enterprises need to seek truth from facts and deal with them in combination with their own development capabilities.

At present, it seems that investment in energy-saving technology is inevitable, otherwise the cost of environmental protection in the future will make enterprises lose their competitiveness. But not blindly, it needs to be implemented gradually with reference to the advancement of the industry. The whole process from raw material procurement, production standard formulation to after-sales service and product destruction uses technology to reduce emissions. For example, in Japan, after an electrical appliance is produced, a certificate will be attached, which is the money to dispose of the electrical appliance in the future. If the certificate is lost when the old electrical appliance is recycled, the user will have to pay the same amount of fees.

Although domestic enterprises are also producing high-efficiency and energy-saving equipment such as motors, fans, pumps, boilers, and high-efficiency motors, most of them are exported, because high-efficiency ones are more expensive than traditional ones, but from energy-saving efficiency Said it was worth it.

Our business is still in the early stages of development and has not been able to allocate environmental costs to products. However, after Copenhagen, the cost of emissions still has to be added in the form of carbon tax and carbon tariff, which has a great impact on Chinese enterprises.

What technical support does a low-carbon economy need?

Cheng Peng: There are two types of important technical support. One is energy-saving technology, which reduces the demand for energy. The technology is different for each industry, each enterprise and each product. For example, in iron and steel enterprises, energy consumption and pollution are very large, and a lot of energy in the middle is not used. Recycling is an energy-saving technology in the iron and steel industry. In the manufacturing industry, there are mainly various energy-saving technologies for lighting and home appliances.

Zhan Jingtao: Siemens has many solutions for energy saving. The first is industrial energy saving, because industrial energy consumption accounts for almost 70% of the total energy consumption, which deserves attention. Siemens has supercritical power generation technology that can help increase the energy efficiency of ordinary power plants from 35% to 45%. Siemens also has IDCC, a technology for gasification of coal, which can effectively improve the efficiency of power plants and relatively reduce carbon dioxide emissions.

In terms of industrial power consumption, Siemens has four better solutions: one is to use fully integrated automation technology to optimize the production process; the other is to use fully integrated energy management technology to increase the transparency of the entire factory and improve the management level; The third is the high-efficiency motor technology; the fourth is the variable frequency drive system. There are also building management systems for building energy efficiency and of course our efficient lighting system - OSRAM Lighting. In terms of power transmission and distribution, we currently have HVDC transmission technology, which has a smaller total loss than traditional AC transmission technology. These technologies are used in the national key routes in Yunnan, Guangzhou, Zhangjiawan and Shanghai. In short, a complete energy chain is formed from power generation to transmission, distribution and consumption.

Cheng Peng: The other category is new energy technology, and the specific development of each energy source is also different. For example, wind power generation, the technology in this area is very mature, but the on-grid electricity price is very high and not very stable, so it must be realized from the technical side.

Zhan Jingtao: At present, the electricity generated by many wind power projects cannot be connected to the grid, and the construction of smart grids is still relatively backward. However, from the perspective of energy-saving projects, the recovery is still quite fast. The fastest project we have done can recover the investment in less than one year.

Cheng Peng: There is also carbon capture technology. Carbon dioxide is emitted through the chimney, which can be collected and compressed by technical means, and pressed into liquid or solid state for landfill. In many oil fields in my country, the oil wells are almost depleted, and carbon dioxide can be collected and then pumped into the oil wells to squeeze out the crude oil. Of course, the starting point of this approach is the exploitation of oil fields, but from another perspective, carbon dioxide is also collected and buried. This technology is quite expensive and takes a long time to do.

Contract energy management, new opportunities for the development of small and medium-sized enterprises

We know that the investment in energy conservation and environmental protection is relatively large. How should small and medium-sized enterprises with weak economic strength respond?

Zheng Shuanhu: At present, most of the policies are aimed at large-scale enterprises. No matter which industry they are in, there is still relatively little attention to small and medium-sized enterprises. The economic strength of small and medium-sized enterprises is relatively weak, and financing is difficult, but from the perspective of unit energy consumption, it is also relatively high. Therefore, during the "Twelfth Five-Year Plan" period, we should pay attention to energy conservation and consumption reduction of small and medium-sized enterprises, and build a Green financing platform and service system, especially to support common models in the industry, this is the direction of our work.

Zhan Jingtao: In fact, small and medium-sized enterprises and large enterprises face the same pressure on energy conservation and emission reduction. For small and medium-sized enterprises, the R&D strength and foresight are not as strong as those of large enterprises, but they can seek cooperation opportunities from R&D institutions or large enterprises. As for the energy saving of the enterprise itself, from the perspective of capital, the contract energy management model can be adopted. In this way, the goal of energy saving and emission reduction of the enterprise has been achieved, and the industry has also been upgraded, without direct investment.

Can you explain this pattern in more detail?

Zhan Jingtao: In this model, an energy-saving service company acts as a third party, which invests and rents energy-saving equipment to enterprises, and then shares the money saved by energy-saving. Assuming that the company originally had to pay 1 million electricity bills per month, after the transformation, it only needs to pay 500,000. Of the 500,000 saved per month, it may have to pay 400,000 to a third party, but this 400,000 is not directly related to the project. investment, and the company can earn 100,000 monthly income. Contract energy management has a certain time limit. After the contract ends, not only all the money saved will belong to the enterprise, but the enterprise can also obtain the property rights of the equipment.

In China, this business started relatively late, and the property rights have not yet been transferred. Of course, there are also self-purchased energy-saving equipment, which mainly depends on the consideration of the enterprise itself. For example, there is an iron and steel enterprise, we calculated it, the energy saving rate is 45%, he thinks why rent such a high energy saving rate, buy it, of course, the profit for the enterprise will be higher. Different entrepreneurs have different ideas.

From a macro perspective, what opportunities are there for SMEs to participate in industrial adjustment?

Cheng Peng: Generally speaking, the opportunity for SMEs lies in the restructuring of the value chain and in driving new markets through technology. There will be more and more energy-saving products in the market. What small and medium-sized enterprises need to consider is how to produce products that are more in line with the requirements of low-carbon economy through technological improvement. In addition, opportunities for the service industry in the tertiary industry will increase, while the secondary industry will be limited. After the industrial structure adjustment, the entire industry will be transformed into a service industry. Zheng Shuanhu: The government organizes energy conservation and environmental protection exhibitions every year, and many small and medium-sized enterprises participate in the exhibition, which shows that there are not no opportunities for small and medium-sized enterprises. In the change of the entire economic model, all production systems, service systems and peripheral supporting systems will change, and the opportunities for small and medium-sized enterprises are here. For example, there are many energy-saving products needed in the production package. Energy-saving products such as solar flashlights and LED light source flashlights are basically private small and medium-sized enterprises receiving export orders.

Can you predict how consumer behavior will change in a low-carbon economy in the future?

Cheng Peng: The deeper the low-carbon economy is, the

consumer behavior around clothing, food, housing, and transportation will develop in the direction of encouraging conservation. In the short term, there will be strict savings, and luxury consumption will decline. There is also a trend, that is, from material enjoyment to spiritual enjoyment, consumers no longer have a lot of material possessions, but tend to consume cultural entertainment.

Zheng Shuanhu: Low carbon will affect both production and consumption. Opportunities for companies come from green behaviors. For example, Japan attaches great importance to the guidance of green consumption behaviors, and is very pragmatic. It has launched a consumption plan like environmental points. The more green things you buy, the more discounts you enjoy. This kind of guidance will inevitably lead some people to organize, design and publicize, and ultimately affect the establishment of social responsibility.

Investment in energy-saving technologies is inevitable, otherwise the cost of paying for the environment in the future will make the enterprise lose its competitiveness. However, it needs to be implemented gradually with reference to the advancement of the industry.

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