VZCZCXRO0571
RR RUEHCN RUEHGH
DE RUEHGH #0541/01 2390821
ZNR UUUUU ZZH
R 270821Z AUG 07
FM AMCONSUL SHANGHAI
TO RUEHC/SECSTATE WASHDC 6182
INFO RUEHBJ/AMEMBASSY BEIJING 1360
RUEHCN/AMCONSUL CHENGDU 0846
RUEHGZ/AMCONSUL GUANGZHOU 0826
RUEHHK/AMCONSUL HONG KONG 0968
RUEHSH/AMCONSUL SHENYANG 0848
RUEHUL/AMEMBASSY SEOUL 0102
RUEHGP/AMEMBASSY SINGAPORE 0074
RUEHIN/AIT TAIPEI 0670
RUEHKO/AMEMBASSY TOKYO 0181
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RHEGGTN/DEPT OF ENERGY GERMANTOWN MD
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUEHGH/AMCONSUL SHANGHAI 6632

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. 
 
------------------------------------------ 
Shanghai Development and Reform Commission 
------------------------------------------ 
 
¶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. 
 
---------------------------- 
 
SHANGHAI 00000541  002 OF 004 
 
 
Shanghai Economic Commission 
---------------------------- 
 
¶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. 
 
--------------------------------------------- -- 
Shanghai Energy Conservation Supervision Center 
--------------------------------------------- -- 
 
¶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. 
 
------------------- 
Industry Roundtable 
------------------- 
 
¶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. 
 
------------------------------------------ 
Shanghai Science and Technology Commission 
------------------------------------------ 
 
¶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. 
 
--------------------------------------------- --------- 
Shanghai Jiaotong University Energy Research Institute 
--------------------------------------------- --------- 
 
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