The Way to Low-Carbon Economy

for Circum-Bohai-Sea Region

PALADINPan Zhaoan,pugo_866@163.comMo Yan, moyan86@gmail.comHe Ni, near_hn@yahoo.com.cnXiamen University

SK

Necessity

World

Chi

na

Situation

Problems

Comparative

Analysis

Eva

luat

ion

Solution

Enterpris

eGovernment

Citi

zen

SK’s Way

Str

ateg

y

Challenges

R&D

Center

1

2

3

4 Provide general solution

for low-carbon economy in Circum-Bohai-Sea region

Specify the actions for SK on renewable energy in Circum-Bohai-Sea region

Goal

Co

nten

ts

◆ Avoid High Cost in the Future Without any action, the loss of climate changing 〓 5% ~20%of GDP 〓 loss of the First World War,

the Second World War and the Great Depression. In 2040, losses caused by severe weather will reach 3 trillion dollars per year, accounting for 3% of the

current global GDP.

◆ Avoid Carbon Lock Definition: with a huge economy , a

country’s technologies and systems based on fossil fuel have great inertia.

If emission peak delays 10 years, the maximum annual emissions rate would expand its 1-fold, from current 2.5% to 5%.

◆ Energy Security Reducing dependence on oil is the goal

of the countries all over the world. More balance energy structure, much

safer energy security.

2000 2001 2002 2003 2004 2005 2006 20070

10

20

30

40

50

60

70

80

The Proportion of EnergyConsumption in China

Coal ShareOil ShareNatural Gas Share Hydroelectric, Nuclear Power and Wind Power Share

Unit:

%

The Necessity for Low-Carbon Economy in the World1.1

The Necessity in China1.2

China relies heavily on coal and oil, whose consumption accounts for 90% of all energy consumption.

◆ Emission Reduction Commitment

China USA EU Russia India Japan Brazil Germany Canada UK0.00

1,000.00

2,000.00

3,000.00

4,000.00

5,000.00

6,000.00

7,000.00

8,000.00

0

5

10

15

20

25Carbon Emissions

Emissions(Million tons) per emission(ton)

Unit:

Unit:

World

China

USA

Korea

Japan

0 1 2 3 4 5 6 7 8

Energy Consumption 2006 2005 2004

Unit: 10 thousand dollars GDP

2009.12.18, Jiabao Wen, Copenhagen,” Carbon dioxide emissions per unit of GDP of China in 2020 will reduce 40% -45% than in 2005”.

The Necessity for Low-Carbon Economy in China1.2

◆ Economic Restructuring China’s energy consumption per GDP is double of

the world average level ; Much higher than USA, Korea, Germany, UK and

Japan .

◆ Pressure of Emission ReductionChina is the country with the largest carbon emissions.

The Energy Distribution of SK in Three Regions1.3

SK international trade (Beijing) Co., Ltd.SK (China) Investment Co., Ltd.SK (Beijing) Highway Technology Co., Ltd.

SK Energy oil (Tianjin) Co., Ltd.

Offshore Oil Chemical Co., Ltd. DalianBeijing Valley Fuel Chemical Co., Ltd. DalianSK Energy Co., Ltd. DandongSK Energy Co., Ltd. ShenyangSK Energy Development Co., Ltd. Shenyang

SK High Oil Co., Ltd. ShandongSK Energy Co., Ltd. ZiboSK Asphalt Co., Ltd. RizhaoSK&Jinchao Plastic Industry (Yantai) Co., Ltd.SK Heruida oil fire Yantai Co., Ltd.YantaiSK Jinchao Plastic Industry (Yantai) Co., Ltd.SK Energy (Qingdao)Co., Ltd. SK Emerging Energy (Qingdao) Co., Ltd.

SK Zhenhua Asphalt Co., Ltd.ShanxiShanxi Huineng Coal Industry Co., Ltd.

SK Energy International Trading (Shanghai) Co., Ltd.SK Takahashi Solvent Co., Ltd. Shanghai

SK Shenxin Packaging Co., Ltd. ZhejiangSK Jin Hua Baoying Asphalt Co., Ltd.Taizhou Zhongran-SK City Gas Development Co., Ltd.SK Baoying Asphalt Storage Co., Ltd. Ningbo

19

60

Energy enterprise resource is concentrated in the Circum-Bohai-Sea.

2005 2006 20070

10000

20000

30000

40000

50000

60000

70000

GDP&GDP Growth Rate

Yangtze River Delta Pearl River Delta Circum-Bohai-Sea

5

10

15

20

GDP in Circum-Bohai-Sea is the compared with the other two （ Reasons ：

It includes Beijing and Shandong which is in the third position nationwide in GDP ）

Pearl River Delta has the largest growth rate, followed with Yangtze River Delta, Circum-Bohai-Sea the

Analysis

The average car ownership is highest in Pearl River Delta with the highest growth rate.

The average car ownership in Circum-Bohai-Sea is the with a soft growth rate compared with the other districts.

Analysis

Average Civilian Car Ownership

1

3

5

7

0

2

4

6

8

Unit: every hundred

persons

Comparative Analysis for The Three Regions2.1

largest

last. lowest

Low-Carbon Standard Evaluation System2.2

Province F1 Rank F2 Rank F3 Rank Score Rank

Beijing 1.78 3 1.50 4 3.48 1 1.94 1

Shanghai 0.61 5 3.65 1 0.11 5 1.77 2

Tianjian 0.39 6 2.55 2 0.90 2 1.36 3

Guangdong 2.70 1 -1.91 10 -0.34 6 0.33 4

Zhejiang 1.82 2 -1.4 7 -1.42 11 -0.02 5

Jiangsu 1.29 4 -1.71 9 -1.37 10 -0.37 6

Inner Mongolia -2.50 10 1.71 3 -0.53 7 -0.46 7

Liaoning -1.22 8 -0.87 6 -0.72 8 -1.00 8

Hebei -1.38 9 -1.51 8 0.89 3 -1.07 9

Shandong 0.07 7 -2.58 11 -1.18 9 -1.22 10

Shanxi -3.56 11 0.59 5 0.18 4 -1.26 11

First level indicators Second level indicators

Low-carbonproduction

Carbon production levelEnergy consumption for unit GDP

Energy consumption for unit industry addedIndustrial waste water emission

Industrial exhaust emissionLow-carbon

consumptionCarbon emission per capita

Energy consumption per capitaElectricity consumption per capita

Low-carbonresource

Forest coverageAverage CDM project emission

Low-carbonpolicy

The yearly total investment resource for industrial pollution control

Government subsidy ratio for industrial pollution control

Set up an evaluation system for low-carbon economic development level

Aim at comparing the low-carbon development level of three economic regions in China

Analyze the strengths, find out the potentials and problems as well as provide solid data base for next section’s analysis.

District F1 Rank F2 Rank F3 RankComposite

ScoreRank

Yangtze River Delta 1.24 2 0.18 2 -0.9 3 0.46 1

Pearl River Delta 2.7 1 -1.91 3 -0.3 2 0.33 2

Circum-Bohai-Sea -0.92 3 0.2 1 0.4 1 -0.25 3

F2: Low-Carbon Consumption and Resource Index

Circum-Bohai-Sea is in the first place;

However ， the population size in Circum-Bohai-Sea is twice times of that in Yangtze River Delta ， three time of that in Pearl River Delta;

Thus ， overall industrial emissions and energy consumption are much higher than the other two districts.

F3 ： Low-Carbon Policy Index

The average reductions of CDM projects is a little bit higher in Pearl River Delta.

Industrial pollution subside from the government in Circum-Bohai-Sea is 8%, which is much higher than the other two areas.

Combining the two factors,

Circum-Bohai-Sea is NO.1 .

Circum-Bohai-Sea is in the last place;

Energy consumption of unit GDP and unit industry value added in Circum-Bohai-Sea is the highest;

Carbon production in Circum-Bohai-Sea is the lowest.

F1: Low-Carbon Production

Index

Low-Carbon Standard Evaluation System2.2

Public AwarenessWeak public awareness Lack of market power

The share from the companies in Circum-Bohai-Sea is the lowest

Companies

Carbon ProductivityCarbon production level is lowEconomic growth pattern needs to be changed

Government Government’s low-carbon plan needs to be improved

Problems for Low-Carbon Economy in Circum-Bohai-Sea2.3

Indicators

★ ★★ ★★★

Energy Consumption per GDP

★ ★★ ★★★

★ ★★ ★★★

Average CO2 Emission ★ ★★ ★★★

★ ★★ ★★★

★ ★★★ ★★

Carbon Production

Industrial Energy Consumption

Average Energy Consumption

The Share of the Companies’ Investment Sources of Current Industrial Pollution Control

Circum-Bohai-Sea

Yangtze River Delta

Pearl River Delta

Power Valley, Solar City National Renewable Energy Industrial Base National Model City on Applied Solar Utilization WWF China’s Low-Carbon City Development Project’s Pilot City

Binhai

City Case

Green Low-Carbon Capital Six “Golden Sunshine”

Projects

The Guidance for Speeding up the Development and Utilization of Solar Energy

Promote the Industrial Development in Beijing

Environmental Friendly to Live

China’s First Experimental Park on Recycling Economy

“Low-Carbon Life Starts from me” TIANJIN Set Up the First Emissions Exchange Market in China

The First Low-Carbon House in China

Solar City

National High Technology Biology Industrial Base

New Energy Industrial Base in State Torch Program

National Renewable Energy Model City on Construction

Applications

Beijing

Baoding

Dez

hou

11

Government Actions for Low-Carbon Economy3.1

Policy

Start low-carbon economic development strategy as soon as possible , which includes the 12th Five-Year Plan

Improve energy statistics system, and gradually introduce carbon emission statistics

Develop and improve the energy efficiency standards, and strengthen the implementation of energy efficiency standards

Economy

Credit support: increase the budget, promote “green credit " via banks

Explore various financing channels: financial allocation , policy bank loans & VC Tax incentives Product subsidies Reform the energy pricing mechanism Explore the "Carbon trading" in the field of

financial innovation Implement the contract of energy

management, international CDM transaction and other

new financing means

R & D

Strengthen international cooperation in low-carbon technology innovation

Set up special funds to support energy technological R & D and innovation

Promote R & D cooperation between Schools and firms

Personnel training Scientific research Project development Information technology

National energy R & D institutions

Government Actions

CitizenShape sustainable consumption patterns

Reuse

Re-calculate

Recycle

Re-evaluate

Reduce

Rescue

Select energy-saving appliances Less use of air conditioners Turn off lights

Purchase new energy vehicles Select the green low-carbon construction Select green food

Buy less disposable products Buy more second-hand or refurbished items Use reusable shopping bags

Do waste sorting and recycling Use readily biodegradable lunch box Use more bio-energy

Establish special conservation areas to save species Refuse fur products Against deforestation and protect the forest

Calculate the direct economic costs Calculate the carbon emission Choose the products with lower price and less carbon emission

Citizen Operations for Low-Carbon Economy3.2

Enterprise Movements for Low-Carbon Economy3.3

Set up a new firm

Co-operation

R&DPurchase Deposits

Open Shanghai's first hydrogen service station for cell vehicles.

Establish two EPR in the UAE with Suez and Areva Group.

Built the megawatt solar photovoltaic power generation system with China in 2004 , whose total installed capacity ranking first in Asia with total investment of 7.5 million U.S. dollars.

Cooperate with Shell in the development and production of natural gas in Sichuan.

Shell China Exploration and Production Co., Ltd. was awarded a CBM project in Shanxi Province with 55% participating interest in 2007.

Invest nearly 180 million Yuan building a 60,000 t / year scale biodiesel demonstration plant.

Plan to spend 3.5 billion Australian dollar on the acquisition of Australian coal bed methane and liquefied natural gas company in 100% equity with Shell Energy Holdings Australia Ltd. Cooperation .

Plan to buy Australia's largest coal bed methane producer Arrow Energy Ltd with Petro China in 2010.

Invest in new energy field more than one billion U.S. dollars annually.

M&A

In December 2009, enter the clean energy field by the acquisition of XTO Gas Company with 41 billion U.S. dollars.

SK will increase its investment in China on renewable energy,Combined with other areas, SK will invest 1 billion Yuan in total.

“

”

SK's Current Decisions in Low-Carbon Industry4.1

1, improve the efficiency to break technological barriers; 2, provide more low-carbon energy3, find any way possible to cut the carbon emission and other polluted emission.

“

”

We mainly realize the technological revolution in three areas:

Solar Energy

Wind Energy

Biology Energy

Challenges for SK in Low-Carbon Industry4.2

2004 2005 2006

The area is new and has a great potential in Circum-Bohai-Sea region

The industry has not set up its competition bar The industrial scale is relatively low For SK, it needs to lead the technology ability

In China’s rural areas, the firewood and coal saving stoves reach 0.2 billion

Approximately 70% of rural households benefit

3,764 large and middle digesters 0.341 billion cube meters biogas

0.12 billion ton organic waste and waste water

80 billion cube meters biogas .

Supporting Policies China has invested 4.8

billion Yuan for the enterprise .

For the fuel ethanol companies, the government exempts 5% of the consumption tax.

Shortage The shortage of raw

resources limits the mass production of biomass energy

It does not set up a comprehensive biomass energy industrial system .

Solid Biomass Energy

Biology Energy

Analysis

Gas Biomass Energy

2.26 billion rural household biogas digesters

9.2% of the total rural households

The 8.7 billion cube meters per year for biogas production

Benefit 0.75 billion people Add 18 billion Yuan directly to

the farmers .

Liquid Biomass Energy1

Strong competition

SK lacks of technology power

Company Strength

First install in Shandong in 1985, later in Tianjin ， own the biggest wind power manufacture in China .

Form the industrial arrangement with Beijing as the center and Dalian, Inner Mongolia as the production bases.

In 2006, set up Tianjin Gamesa Wind Power Company.

In Jan, 2007, set up a blade manufacture in Dongying.

In Tianjin ,set up a joint venture manufacture-Ruineng North Fans Manufacturer.

Representative is in Beijing ;Set up Tianjin Suzlon Energy Company.

Wind Energy Industry Ranking for Countries

ChinaUSA

Spain

German

yIndia

Italy

France

Engla

nd

Canad

a

Portuga

l0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

Million Watt

Challenges for SK in Low-Carbon Industry4.2

Wind Energy distribution in ChinaWind Energy

Analysis2

60% to 70% of the solar battery industry in China is controlled by the above companies, which set the industry line bar extremely high and difficult for others to enter in.

For SK, it is urgent to set up a R&D center, which will help SK to take advantage of the convenient management.

Companies Strength Weakness Solar battery production level is

the second internationally. No specific R&D or sales department in

Circum-Bohai-Sea

Headquarter is in Baoding Inefficient management team

Representative is in Beijing, set up a solar company in Tianjin

It is a joint venture company with China Yiqing Group, which bring operation risk

Complete running arrangement in Circum-Bohai-Sea

No R&D center in Circum-Bohai-Sea

Challenges for SK in Low-Carbon Industry4.2

Company Names2007 2008 2009

Supply(MW)

Sales(MUS$)

Sales(MUS$)

Supply(MW)

Sales(MUS$)

Suntech Power Holding. Co., Ltd 64 1348.3 497.5 1923.5 704 1693.3Canadian Solar Inc 83.4 302.8 167.5 709.2 325.3 643.3

Solarfun Power Holdings. Co., Ltd 78.4 328.3 172.8 725.4 313.4 553.5Trim Solar Limited 67.96 301.8 201.01 831.9 399 845.1

JA Solar Holdings Co. Ltd 132.4 369.3 277 800 509 553.7Yingli Green Energy Holdings Co. Ltd 142.5 580 281.5 1107.1 525.3 1062.8

China Sunergy Co., Ltd 74 234.3 107.2 350.9 194 284.9

Competitors Analysis for SK in solar industry in Circum-Bohai-Sea region

Solar Industrial Analysis

3

Domestic Companies’ Supply and Sales

Supply (MW)

Renewable Energy

Current Development

Future Picture

Technology Requirement

Entering Threshold

Government Support

Money Resource

Solar ★★★ ★★ ★ ★ ★★ ★★

Wind ★★★ ★★ ★★ ★★ ★★ ★★

Biomass ★ ★★★ ★★★ ★★★ ★★★ ★

Weakness

International management style Large investment package Complete running arrangement in Circum-Bohai-Sea

No R&D center in Circum-Bohai-Sea

Unstable fund resources problem

Government Support: The Circum-Bohai-Sea region has make its low-carbon economy as its main development road in the future

Technology Innovation Investors’ enthusiasm for the low-

carbon economy

Single financial resource Depend on the business cycle Operation risk

S W

O T

Evaluation on Renewable Energy4.3

SWO

T Analysis for SK on Renew

able Energy

4.4

Wind

1.Fans Manufacture ★ Abandon the industry.

2.Wind Farm ★ Our suggestion for SK is

to cooperate with some local state-owned power groups to own a share in the business.

3.Additive Market ★ SK could use the

opportunity to share the Circum-Bohai-Sea market with its high technology level in battery field, sales net and local government policy.

★ SK could use its technology advantage to enter the field along with the well-prepared sales channels and sufficient capital.

★ Another method SK could use is to joint venture with the local companies.

Solar

Products for SK in Low-Carbon Industry4.5

★ Develop its Fuel ethanol : It is a blank field in Circum-Bohai-Sea region.

★ Explore biodiesel: Because the companies at home and abroad are entering the field consecutively, SK needs to seize opportunities.

Biomass

For

Maintain Core Competitiveness

Set up a R&D Center

It’s the national politics center, which helps to know and master the policy changes in time There are many universities and research centers in Beijing, which helps the process of the R&D Close to SK headquarter, easy to manage

Strength

Tianjin

Beijing

Shanghai

High living cost ， lower the employee’s happiness High housing price, which increases the running cost Weakness

It’s a national new energy center Local governments provide preferential policies for the companies Intercity Highway makes Beijing and Tianjin as a whole Relative low housing price

Strength

Inefficient human resources Hard for SK headquarter to manage Weakness

SK has stable sales net in Yangtze River Area Competitive Human Resources

Strength

The Farthest from SK headquarter High living cost High housing price

Weakness

Advice: Choose Tianjin

R&D Center Decision for SK in China4.6

R&D Center in China

SK

Necessity

World

Chi

na

Situation

Problems

Comparative

Analysis

Eva

luat

ion

Solution

Enterpris

eGovernment

Citi

zen

SK’s Way

Str

ateg

y

Challenges

R&D

Center

1

2

3

4Summary

Thank You ！