ENERGY EFFICIENCY:

China's regulators tackle energy-guzzling buildings

SHANGHAI -- For Jin Liang, a typical Chinese who watches his utility bills carefully, each scorching hot summer day posed a dilemma: Should he switch on his air conditioner, or keep it off to cool the impact on his wallet?

But his dilemma faded away this year after Jin moved into a new apartment. It features magical materials that allow him to comfortably turn off the air conditioner and yet stop sweating.

"This apartment has thermal insulation," Jin explained. "It can stay cool for a few hours after I turn off the air conditioner. So there is no need to keep it on as much as I did before."

As a result, Jin's electricity bill was cut by one-third, good news for the 33-year-old apartment dweller, as well as for the nation. China has picked a fight against a ruthless, energy-guzzling demon -- its millions of buildings.

Currently, China's buildings consume more energy than its three largest heavy industries -- iron, steel and cement -- combined.

And the energy consumption of buildings will only get worse. Every year, nearly 2 billion square meters of new buildings -- roughly equivalent to the total building footprint in Canada -- is being added here. And, while Chinese families now use 80 percent less energy per square meter than North Americans do, this gap is being narrowed by the day as Chinese are getting wealthier and are upgrading their lifestyles with electric appliances.

But this can't go on. "If China can't improve its energy efficiency in buildings, by 2020 its buildings' energy consumption will account for one-fifth of the world's total coal consumption. That is far beyond the country's energy supply ability," said Jin Ruidong, green building project director at the Natural Resources Defense Council.

Such growth is not only clouding China's energy future but also threatening Mother Nature. With more than 70 percent of China's energy coming from coal, a power source that contributes heavily to air pollution and global warming, the nation's bad or good energy practices in buildings will be reflected in the color of the sky and the temperature of the Earth.

Requiring energy efficiency in new urban buildings

To minimize these problems, Chinese policymakers in recent years ordered real estate developers to comply with new codes. While measures vary, from installing insulation to deciding the direction for the house to face, the mission is clear: to enable dwellers to live comfortably while consuming less energy.

Meanwhile, more efforts are exerted to ensure the mission actually gets carried out. Every year, delegations are sent from Beijing to every urban corner of this continent-size nation to run random checks, aiming to hunt down corrupted officials and straying contractors.

As a result, in 2010, more than 95 percent of newly constructed buildings in cities are energy-efficient, according to the Chinese standards, up from nearly 25 percent five years ago, Beijing reported happily in its annual statement. But as always, the devil is in the details.

Since the inspectors from Beijing mostly review documentation, the majority of on-site checks are carried out by local authorities, who are already understaffed and are buried with mountains of other tasks. With too few staff members going through too many buildings, doubts are raised on the quality of their inspections, according to a 2011 report issued by the U.S. Department of Energy's Lawrence Berkeley National Laboratory.

And even when local authorities get the time to inspect, Chinese leaders admit, they often lack the ability to judge whether building materials meet the energy efficiency standards.

But what's most worrying, according to experts, is the fact that China's energy efficiency regulators ignore a segment that is home to half of the Chinese population.

Rural areas fly under the regulatory radar

Due to lack of mandatory codes, in rural areas, builders hardly bother to design buildings in an energy-efficient way, says Niu Fengrui. He researches rural regions and real estate issues at the Chinese Academy of Social Sciences, an influential government think tank in Beijing.

What's worse, inefficient building materials flourish there for their cheap costs. Niu noted that one type of brick that is officially banned in China and has already disappeared from cities can be easily found in the countryside of his hometown -- a few hours away from the Chinese capital.

But Chinese villagers are about to get more green attention. According to the government must-do list in 2011, a pilot program will be developed to allow builders in rural areas to purchase energy-efficient building materials with subsidized prices.

But more subsidies also mean heavier financial burdens. Already, in northern China, where decades-old residential buildings swallow two to three times more energy than comparable European buildings, local authorities struggle to come up with sufficient money to retrofit them. And to upgrade buildings' energy efficiency nationwide, Chinese officials estimate that a total of $232 billion will be needed by the end of the decade.

To that end, the government here hopes to get an extra hand from the private sector, particularly from companies that invest in building retrofitting and profit from the amount of energy they help save.

Barriers that need removal

However, this solution, while successful in Europe and the United States, has been hit by three barriers unique to China.

For one, in China, proposing such retrofitting projects often means enduring tedious negotiations, as residential buildings commonly accommodate dozens of families. In addition, upgrading energy efficiency often goes hand in hand with improving living conditions like adding an elevator to a staircase-only building. That makes the calculation of energy savings a complicated matter. Furthermore, there is a missing link in the system that provides the finances.

According to a recent statement from the Asian Development Bank, energy-saving service providers lack assets to place against a loan from Chinese banks, while the banks themselves lack experience in financing energy efficiency projects.

But there is a growing interest in changing this situation. To encourage investment from local banks, the Asian Development Bank has set up a multimillion-dollar guarantee program to share the financial risk with them. And a local trading platform called China Beijing Environmental Exchange last year rolled out a new service marrying financial capital with energy-saving service providers.

Moreover, the Chinese government began backing qualified providers with subsidies, tax breaks and low-interest loans, with a hope to foster this nascent industry, according to Michael Harris. He is vice president at Johnson Controls, a global technology giant that has expanded its building efficiency service to China.

Still, even if investments are made and the most cutting-edge technologies are adopted, China can't escape from its building energy crisis.

Cap-and-trade rewards for energy misers

In public buildings especially, where users don't pay for electricity bills, it isn't unusual to see energy-saving light bulbs lighting up unattended classrooms, or efficient air conditioners chilling down empty office buildings overnight.

"In many cases, energy management is actually more rewarding than decorating buildings with energy-efficient products," says Tan Hongwei, head of green building and the new energy research center at Tongji University, whose words have been put into test at his own campus.

There, Tan and his team set up an energy monitoring system that collects real-time data so that designated staff can quickly turn off forgotten lights, for instance. By killing energy waste, Tan said, more than a million dollars was saved on annual electricity bills, despite the fact that the campus never stopped adding new buildings.

Nationwide, similar energy monitoring systems are increasingly being used in schools, hospitals and government facilities. And to get commercial buildings to better manage their energy use, in the next five years, policymakers here plan to introduce a cap-and-trade scheme, the first of its kind in the developing world.

Under such a scheme, hotels, shopping malls and office buildings that use energy beyond a set limit would be required to buy more allowances, while those that become more efficient could sell allowances they no longer need.

Already, several cities -- including Beijing, Shanghai and Tianjin -- are technically prepared, said Jin of the Natural Resources Defense Council, who advises the Chinese government on this issue. And what's keeping officials' and experts' minds busy, he added, is how to draft a policy that is tough enough to pressure building owners to save energy yet is soft enough to get followed.

While this scheme is still in the making, Jin seems to be optimistic about its impact.

"Government subsidies can start a transformation; it can't sustain it forever," he explained. "But this scheme is a market-oriented mechanism. It will play a significant role in improving China's building energy efficiency."

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