10 May 2010 08:24

China's EMC industry on track for rapid expansion

Shanghai. May 10. INTERFAX-CHINA - The energy management contract (EMC) industry is on track for rapid expansion in China thanks to the country's efforts to improve energy efficiency and environmental protection.

The EMC industry emerged in the 1970s in western countries and has become increasingly popular in developed countries such as United States and Canada.

In the EMC business model, professional energy management contractors help clients improve daily energy consumption efficiency and are paid fees based on a percentage of their clients' reduced energy costs.

The EMC industry was introduced in China in 1998 and has been expanding rapidly in recent years.

According to statistics by the National Development and Reform Commission (NDRC), China's state economic planner, there were 502 EMC service providers in China at the end of 2009.

These firms generated total business revenues of RMB 58 billion ($8.49 billion) in 2009, up almost 40 percent from RMB 41.7 billion ($6.11 billion) in 2008.

By offering professional devices and expertise in optimizing energy consumption, the EMC industry in China helped save the equivalent of 13.5 million tons of standard coal in 2009, according to the NDRC.

"The EMC industry is very important for China, which is already the world's largest coal consumer and second-largest oil consumer. The industry will not only help China reduce its fossil fuel consumption but also cut carbon emissions, both of which are big environmental concerns around the globe," said energy expert Li Lei Beijing.

In December 2009, China promised to cut its per GDP unit carbon emissions by 40-45 percent from 2005 levels by 2020 at the Copenhagen Global Climate Summit.

Carbon emissions reduction efforts will be achieved through the promotion of renewable energy like wind, solar and nuclear power, as well as by improving energy consumption efficiencies.

"China consumed the energy equivalent of 3.1 billion tons of standard coal in 2009, while its GDP in the same year stood at RMB 3.3 trillion ($483 billion). Considering the fact that China's per GDP unit energy consumption rate is still four to five times higher than that of countries like Japan and Germany, its energy conservation sector still has much room for improvement. It is the perfect opportunity for the EMC business in China," said Li.

"Industrial firms and architecture (buildings) in China, both of which are heavy energy consumers, must also improve their consumption efficiency. These sectors are two of the biggest potential clients for EMC firms," Li said.

According to research by Shenyin & Wanguo Securities, industrial firms accounted for around 63 percent of the EMC industry's source of business revenues in 2008, while architecture in the same year accounted for 33 percent.

Anticipating that industrial firms and architecture will need increasing amounts of EMC services in China over the next few years, Shenyin & Wanguo Securities is optimistic about the business outlook for EMC services in the country.

Some energy-intensive industries in China, like construction materials, cement, steel and thermal power have traditionally neglected the energy-efficiency issue. Buildings and architecture in China have had the same problem, as most people failed to take the issue seriously, according to Shenyin & Wanguo Securities.

The investment bank forecast that the total business revenues for EMC firms in China would top RMB 80 billion ($11.71 billion) in 2010 and would grow further to RMB 400 billion ($58.57 billion) annually over the next few years.

Donghai Securities, an investment bank, also projected a rosy outlook for the EMC industry in China over the next few years, citing the central Chinese government's new policy announced in early April.

The policy, which was drafted jointly by the NDRC, China's Ministry of Finance, the General Administration of Taxation and the People's Bank of China, says that the central government will encourage and support development of the EMC industry in China over the next few years by providing subsidies, tax incentives and financing.

The policy also calls for cultivating a professional and competitive EMC sector in China by 2012 and establishing relatively mature EMC services by 2015.