By Michael Kanellos
Two weeks ago, we wrote that U.S. companies focused on demand response and energy efficiency might start moving to China to take advantage of efficiency goals announced in the country's most recent Five Year Plan. This week, Johnson Controls (NYSE:JCI) was awarded an “Energy Saving Service Institution Record Certificate” that qualifies it to provide comprehensive building efficiency services in China.
The new regulations require Chinese utilities, which are state-owned entities, to reduce energy sales volume by 0.3 percent a year through efficiency gains. It doesn't sound like a lot, but that much energy could power 1 million U.S. homes for a year. (California public utilities are encourage to cut power by 1.5 percent a year.)
The figure also represents a minimum. More urban and industrialized provinces could set more ambitious goals and achieve higher savings. Since regional party leaders often land positions in the central government through exceeding goals on nationwide efforts like this, a number of bureaucrats may see this as a path to a substantial promotion.
To start saving power, some utilities have begun to form their own Energy Service Companies (ESCO) to devise and execute efficiency strategies for local businesses.
Why would Chinese utilities, though, cooperate with U.S. or European energy specialists? Experience counts, Julio Freidmann, the carbon management program leader at Lawrence Livermore National Labs told us at the Scaling Green Finance conference sponsored by the Asia Society on December 8. Energy projects and technology revolve around logistical and project management expertise. Duke Energy (NYSE:DUK), after all, is eyeing projects in the U.S. and China by virtue of a relationship with ENN, a sprawling conglomerate that started as a car rental agency. First Solar (NASDAQ:FSLR), eSolar and Solar Reserve (a rising solar thermal company) have all managed to move into China the same way.
When it comes to building efficiency, it is tough to beat Johnson Controls. The company has been in business for 125 years, or decades longer than the People's Republic of China. While China (like most other nations) creates laws to help local industries, it will reach out when necessary. Chinese solar module makers, meanwhile, have begun to buy components and license technology from startups like Innovalight and 1366 Technologies to boost efficiency and make their panels more competitive with Western counterparts.
China will add 300 billion square feet of real estate over the next 20 years, Marc Porat, the founder of three green building companies, told us last year.
Who will be next? EnerNoc (NASDAQ:ENOC) or Constellation Energy (NYSE:CEG), which bought demand response company CPower earlier this year, might venture to China. The country has virtually no demand response networks as we know demand response, according to Mona Yew, director of the China Demand Side Management and Energy Efficiency Project at the National Resources Defense Council.
Honeywell (NYSE:HON), Johnson's main competitor in building controls, will likely get a certificate too, if the company doesn't have one already.
Trilliant, which makes smart grid equipment, could pop up in China as well. Earlier this week, it announced an investment from UMC and plans to expand into Asia. UMC is Taiwanese but, like other Taiwanese chipmakers, has strong relations with mainland China.