VZCZCXRO8980
RR RUEHCN RUEHVC
DE RUEHGH #0169/01 1040832
ZNR UUUUU ZZH
R 140832Z APR 09
FM AMCONSUL SHANGHAI
TO RUEHC/SECSTATE WASHDC 7834
INFO RUEHOO/CHINA POSTS COLLECTIVE
RUEAEPA/HQ EPA WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RHMFISS/DEPT OF ENERGY WASHINGTON DC
RHEHAAA/NSC WASHINGTON DC
RUEHGH/AMCONSUL SHANGHAI 8474

UNCLAS SECTION 01 OF 03 SHANGHAI 000169 
 
SENSITIVE 
SIPDIS 
 
STATE PASS TO CEQ SUTLEY 
EPA FOR INTERNATIONAL - KASMAN/GIANNINI-SPOHN 
USDOC FOR MAC AND MAS 
USDOE FOR INTERNATIONAL 
NSC FOR LOI 
STATE FOR S/SECC-STERN/PERSHING 
STATE ALSO FOR EAP/CM-HABJAN 
STATE ALSO FOR EEB AND OES 
 
E.O. 12958: N/A 
TAGS: ENRG ECON TRGY SENV EFIN CH
SUBJECT: SHANGHAI PROMOTING ENERGY EFFICIENCY AND RENEWABLE ENERGY 
RESOURCES 
 
SHANGHAI 00000169  001.2 OF 003 
 
 
¶1.  (SBU) SUMMARY: To meet Shanghai's energy demands and 
ambitious Central Government-mandated energy consumption 
reduction targets, Shanghai officials are working hard to adjust 
the city's energy mix by reducing its reliance on coal through 
the use of environmentally-friendly resources and improving 
energy conservation and efficiency, especially in the industrial 
sector.  Shanghai is hoping to change the mindset of its 
citizens to be more energy conscious and is developing several 
renewable energy resources, including wind, solar, and biomass. 
The current economic downturn has had little impact on the 
city's long-term plans for renewable energy, and Shanghai hopes 
to spur economic growth through "green recovery" -- new energy 
and environmental-related projects, including alternative energy 
vehicles.  Officials cited the high cost of technology as a 
barrier to promoting renewable energy use and encouraged more 
Sino-U.S. cooperation in that regard.  END SUMMARY. 
 
¶2.  (SBU) During a visit to Shanghai in early April, Embassy 
Minister-Counselor for Economic Affairs Luke accompanied by 
Congenoffs met with GAO Yun, Deputy Director of the Shanghai 
Economic and Information Technology Commission, to discuss 
Shanghai's plans for renewable energy development, energy 
conservation, and the impact of the global economic downturn on 
these plans.  Congenoffs also met previously with ZHOU Ya, Chief 
Economist, Shanghai Development and Reform Commission (SDRC) and 
GAN Zhongze, Chairman, Urban Planning and Environmental 
Protection Committee, Shanghai Municipal Peoples Congress (SMPC) 
to discuss Shanghai's energy strategies. 
 
Decreasing Coal Dependency - Conservation and Efficiency Are Key 
--------------------------------------------- ------------------- 
 
¶3.  (SBU) Shanghai officials noted that the city is working hard 
to adjust the city's energy mix by reducing its reliance on 
coal, which accounts for over 50 percent of the city's energy 
sources.  SDRC's Zhou Ya said that Shanghai's total energy 
consumption in 2008 was 97 million tons of coal equivalent (TCE) 
with per capita consumption equaling 5.3 TCE, more than twice 
the national average.  All of our interlocutors emphasized that 
Shanghai has to be creative in developing 
environmentally-friendly resources, while improving energy 
conservation and energy efficiency to meet not only the 
ambitious energy consumption reduction targets mandated by the 
Central Government, but also the city's ever increasing energy 
needs.  The Economic Commission's Gao Yun said that Shanghai has 
thus far achieved its goal announced in 2005 of reducing its 
energy intensity (energy consumption per 10,000 RMB of GDP) by 
four percent every year for a targeted total of 20 percent by 
¶2010. 
 
¶4.  (SBU) Gao said that Shanghai's energy consumption breaks 
down as follows: 10 percent personal consumption, 30 percent 
service sector, and 60 percent industrial sector.  As industrial 
consumption accounts for the majority of Shanghai's total energy 
usage, Gao stressed that more attention is being placed on 
energy conservation and efficiency in that area.  Industry 
players are required to assess their energy efficiency using 
benchmarks established by industry leaders, and companies may be 
forced to move out of Shanghai if they fail to meet the 
benchmark requirements.  More broadly, Shanghai is also 
accelerating the process of energy conservation through the 
promotion of new conservation technologies.  Gao said Shanghai 
aims to slow the energy consumption growth rate from the 7-8 
percent annual growth of recent years. 
 
¶5.  (SBU) While technology innovations and stronger conservation 
measures for the industrial sector are key requirements, SMPC's 
Gan believed that changing the mindset of Shanghai's citizens 
would be the paramount task.  He said that Shanghai residents 
must increase their "social responsibility" by buying smaller 
cars, using more public transportation, and otherwise reducing 
personal energy consumption.  Shanghai's hosting of the 2010 
World Expo, with a green theme of "Better City, Better Life" 
will be a prime opportunity to raise public awareness of energy 
conservation and environmental protection, said Gan. 
 
Shanghai to Pursue Multiple Renewable Sources 
--------------------------------------------- 
 
SHANGHAI 00000169  002.2 OF 003 
 
 
 
¶6.  (SBU) According to Gao, there is no "best fit" for the 
city's development of renewable resources.  Shanghai has to 
develop multiple resources to meet future energy needs, 
including wind, solar and biomass.  Gao explained that although 
Shanghai can often meet its wind power generation goal in the 
winter, its wind power is generally inadequate in the summer 
except when a typhoon draws near.  Shanghai is trying to take 
advantage of offshore wind by constructing China's first 
offshore wind farm along the 22-kilometer Dong Hai Bridge that 
links Shanghai's Pudong District with Shanghai's offshore 
Yangshan Deepwater Port.  This offshore wind farm has a planned 
capacity of 100,000 kilowatts with the capacity of each 
stand-alone windmill reaching three megawatts.  Construction has 
already begun, and the project is expected to be completed in 
¶2012.  Compared to traditional onshore wind farms, offshore 
farms require greater investment and more advanced technology. 
However, they do not take up land and can provide more abundant 
wind power.  Gao also mentioned city plans for wind farms on 
Chong Ming Island and Chang Xing Island in the mouth of the 
Yangtze River. 
 
¶7.  (SBU) Regarding solar power, Gao explained the different 
usage of solar thermal energy (STE) and photovoltaics (PV).  STE 
converts solar energy into heat, and is mostly used in 
buildings.  According to Gao, STE traditionally is better suited 
for low buildings.  Now with the advent of more advanced 
technology, balcony rails may be designed to absorb solar energy 
and convert it into heat.  This could have a significant impact 
if widely adopted, said Gao.  Photovoltaics, unlike STE, convert 
solar energy directly into electricity.  Given Shanghai's high 
number of cloudy and rainy days, the cost of producing 
electricity directly from solar energy is still very high.  This 
technology is still in its testing phase and requires government 
support, said Gao. 
 
¶8.  (SBU) Shanghai is also looking at biomass as a potential 
source of renewable energy.  Shanghai currently generates 6,000 
tons of garbage daily, so the potential is quite large. 
According to Gao, Shanghai has already set up some small-scale 
biomass power generation facilities, but large-scale ones are 
still under design. 
 
Financial Crisis Will Not Impact Long-term Energy Plan 
--------------------------------------------- --------- 
 
¶9.  (SBU) Even though Shanghai's economy has been impacted by 
the global economic downturn, the city will continue developing 
renewable energy, improving energy efficiency, and encouraging 
energy conservation, asserted Gao.  Shanghai will invest more in 
solar and wind power, as well as further develop and deploy 
alternative energy vehicles.  He touted Shanghai GM (a 
joint-venture between Shanghai Automotive Industry Corporation 
(SAIC) and General Motors) that has developed such vehicles. 
This, together with other new energy and environmental-related 
projects, will spur Shanghai's future economic growth, a "green 
recovery," said Gao. 
 
Preferential Tax Policy for Hybrids 
----------------------------------- 
 
¶10.  (SBU) According to Gao, the Shanghai Municipal Government 
will soon release a new preferential tax policy for hybrid car 
purchases.  Any hybrid car with a gasoline savings rate over 15 
percent will qualify.  In China, currently, only Changchun 
Toyota (a joint-venture between China's First Automotive Works 
in Jilin and Toyota) and Shanghai GM produce cars that meet the 
15 percent gasoline savings threshold.  By 2012, new energy 
vehicles are expected to account for 5 percent of the total 
number of vehicles in China, said Gao. 
 
High Cost Still an Obstacle to New Technologies 
--------------------------------------------- -- 
 
¶11.  (SBU) Gao believes that cost is still the main obstacle in 
promoting renewable energy.  Shanghai is interested in new 
innovations such as General Electric's clean coal technology, 
but the cost is too high.  Similarly, Applied Materials supplies 
 
SHANGHAI 00000169  003.2 OF 003 
 
 
equipment to manufacture thin-film PV batteries.  Even though 
the cost to make a PV battery is only half the cost of making a 
traditional silicon crystal PV battery, the manufacturing 
equipment made by Applied Materials is still very expensive, 
costing USD 85 million each, according to Gao.  Gao encouraged 
more Sino-U.S. cooperation in developing renewable energy and 
energy efficiency technology in order to lower the cost of such 
equipment. 
 
¶12.  (U) Embassy EconMinCouns cleared a draft of this report. 
CAMP