Thank you Principal Engineer Wang for that introduction. On behalf of United Technologies, I am very pleased and honored to speak here today.
Special thanks to the Chinese Ministry of Housing and Urban-Rural Construction (the recently renamed MOC) for the invitation to speak here today. I also am pleased to present in the same session this afternoon with UTC friend and partner, Vice Minister Qui Baoxing.
UTC has been honored to have had a chance to speak at this event every year since its inception in 2005, including our Chairman George David who spoke in 2006 and used this podium to launch key initiatives in global building efficiency, including the World Business Council for Sustainable Development … the WBCSD … study project that I will report on today.
For those who don’t know us well, United Technologies is a Fortune Global 500 company providing high technology products and support services to the building systems and aerospace industries.
In 2007, we had revenues of 55 billion US dollars, 60 percent outside the US …. We have 226,000 employees, almost 15,000 of them in China.
- UTC is made up of seven business units, companies named in many cases for the people who invented their industry, and made modern life possible
- Pratt & Whitney aircraft engines
- Sikorsky helicopters
- Otis elevators
- Carrier heating, air conditioning and refrigeration systems
- UTC Fire & Security including Kidde fire protection systems and Chubb security
- Hamilton Sundstrand aircraft and space systems… and industrial products
- UTC Power with its hydrogen-powered fuel cells used in the space program, for stationary power generation and for mobile fleet applications, as well as a line of on-site co-generation and geothermal power generation products.
United Technologies Research Center pioneers and develops new products for all of these diverse businesses from its research operations in both Connecticut and Shanghai. As the head of UTC’s science and technology organization, I lead technology development across the business units, with relentless attention to our customers’ needs. And our customers’ needs have increasingly pointed us toward solutions for more efficiency and more environmentally sound products.
We have an expression at UTC … You can see everything from here. The breadth of our products and our global scale provide this unique vantage point.
We have a simple, disciplined and proven approach to profitability and environmental responsibility: Every day we look for ways to reduce the environmental impact of our operations and the products we deliver.
We set our first Environmental, Health & Safety goals in 1991, and have publicly reported on our environmental performance since 1992.
In 2007, UTC launched its latest and most aggressive set of Environment, Health & Safety goals. In 2007, we reduced greenhouse gas emissions by 5 percent (exceeding our 3 percent annual goal) and water consumption by 6 percent.
At the same time, UTC grew from $48 billion to $55 billion in revenues. Our goals are for absolute improvements, as we continue to grow our businesses.
Our approach to sustainability captures our full value chain, including our supplier base. In 2007, more than 1,000 key suppliers representing approximately 40 percent of UTC’s product spend, completed self-assessments against our baseline environmental expectations.
And as the manufacturer of products which last a long time, this attention to environmental impact extends to our products. For the first time, we have targeted all new products for improved environmental performance. Our goal is for all new products to increase energy efficiency and reduce packaging by 2.5 percent annually.
We spend $3.6 billion annually on research and development. 40 percent of our advanced technology research budget is targeted at projects that benefit the environment directly, via clean energy generation, or indirectly, by reducing energy consumption of UTC products in service.
Let me give you a few examples.
Otis regenerative Gen2 elevators today use 75 percent less electric energy than comparable equipment did a decade ago. Elevators consume electric power when lifting loads. The Otis regenerative Gen2 elevators give this power back with descending loads, and we are broadening this capability across Otis’ product line.
For this product, Otis was recognized by the Chinese government as one of China’s “Top 10 Architectural Science and Technology Achievements.”
And Otis also became the first elevator company to receive the “Green Product Award” from the China Environmental Protection Foundation for the Gen2 system.
Next month, Carrier is launching the Evergreen® 19XRD variable speed screw chiller. This is Carrier’s largest single-unit cooling capacity chiller employing the non-ozone depleting refrigerant HFC-134a and it will be manufactured in Shanghai.
Carrier’s Global Research and Development Center in Shanghai developed and engineered the chiller for large airports, shopping malls, commercial complexes, factories and district cooling plants.
This dual-compressor and large cooling capacity chiller achieves up to a 7 percent improvement in integrated part-load efficiency. In a large commercial building that requires 12,000 RT cooling capacity and operates 180 days per year, the chiller can reduce annual electricity usage by approximately 400,000 KwH, the total annual electricity consumption of 222 Shanghai families.
Among Carrier’s landmark projects in China that utilize our Evergreen chiller technology include Beijing’s 2008 Olympic venues and related facilities. This type of technology has helped Carrier to be awarded 70 percent of HVAC contracts they pursued for the Olympics.
Our UTC Power business has been working with the MOC to bring onsite power solutions to market in China. These include so-called Combined Heat Power (CHP) solutions that use waste heat from primary electricity generation to provide cooling and hot water for heating and sanitary purposes and can be up to 90% efficient… other on-site power solutions include geothermal power generators.
I’d like to add that in addition to our building systems, UTC has targeted environmentally sound innovations in our aerospace products.
In 2007, we launched Pratt & Whitney’s new Geared Turbofan jet engine with a projected 12 percent fuel efficiency improvement, 55 percent lower NOx emissions and 20 dB less noise than current best in class engines conventional designs. We have 2 launch customers for this new product – the Mitsubishi MRJ and Bombardier CSeries regional jets.
We build efficient products and reduce our own impact not just because it is good for the environment but also because it is good for our customers and brings real value to the company.
UTC’s commitment to responsible operations extends beyond its products to the way we design, build and operate our facilities worldwide.
As an example, Otis Elevator has recently commissioned a new state-of-the-art manufacturing facility in Tianjin, China. Environmental and energy factors drove the design and construction of this new facility which achieved a projected 25 percent energy reduction as compared with conventional construction methods and materials, with only a 4 percent additional cost.
The resulting energy efficiency improvements also led the MOC to honor Otis with its first building designation award as a MOC green factory. Otis is now pursuing a USGBC LEED gold rating for this facility.
On our aerospace side, I should note that Pratt & Whitney’s China Eastern Airline’s maintenance and repair facility broke ground in September 2007 and targets LEED platinum. Once complete, it is expected that at least 12.5 percent of the facility’s energy use will come from renewable sources.
Effective in 2008, all new UTC construction around the world will be LEED certified.
And we will invest $100 million over the next four years in energy conservation projects, including co-generation systems.
You can see from my UTC product and operation examples that we can successfully overcome our shared environmental challenges and believe this is of vital importance.
UTC and China have had a very productive relationship over the years, including a long history. In 1888, Otis delivered its first elevator to China.
And Dr. Carrier himself established customer links with China in the 1930s where our air conditioning equipment was first installed in Shanghai.
Today we have 40 joint ventures, 14 manufacturing facilities, almost 15 thousand employees and almost 18 billion RMB in annual China sales in 2007.
We have worked closely with our Chinese partners to get to where we are. We applaud the Chinese government’s commitment to big goals to ensure sustainability in their rapid development.
The themes of China’s current Five Year Plan align with our company -- “Harmonious Society” “Scientific Development” and “Indigenous Innovation”. Two specific goals in the five-year plan include doubling GDP by 2010 and reducing energy intensity per unit of GDP by 20 per cent over the same period – both represent important business and environmental responsibility opportunities for UTC.
In order to meet these goals, China’s building and aerospace development will need energy efficient solutions. The energy intensity goals are impressive and laudable in light of double digit growth in both real estate and air traffic.
Besides initiatives in conservation, efficiency and enforcement, the Chinese government plans to invest US$185 billion in renewable energy by 2020. The current 5-year plan calls for renewables to total 10% of total energy supplies.
Their multi-tiered approach is necessary to achieve aggressive goals. Premier Wen Jiabao said earlier this month that China has given “high priority to conserving resources and protecting the environment.” He also indicated that China plans to “enhance public awareness of the importance of conservation and encourage the entire nation to participate in building a resource-conserving and environmentally-friendly society.”
He has reported that for the first time in recent years China had a reduction in both chemical oxygen demand and the total emission of sulfur dioxide – an impressive achievement in the face of double-digit GDP growth.
We applaud the Premier and the MOC in maintaining their momentum. In March 2006, UTC signed a Memorandum of Understanding with the Chinese Ministry of Construction to work together to promote sustainable development of buildings and cities in China. Our engagement includes a specific work plan with the Ministry’s Construction Science and Technology Council. Notable outcomes from this partnership include a Mayors training program and sharing certification audit know-how.
In September 2007, UTC signed a major five-year funding agreement with Tsinghua University to fund a joint research institute which will focus on energy efficiency in buildings. The current head of this institute, Professor Jiang Yi, shares this plenary session with me today. I wish him the best in this role and look forward to our joint research done under his leadership.
This partnership with Tsinghua University and our partnership with the MOC recently contributed to the Energy Efficiency in Building project that is integral to the themes of this conference.
At this event in March 2006, UTC’s CEO, George David, announced the WBCSD Energy Efficiency in Buildings project, co-chaired by UTC and Lafarge. Ten other companies around the world have joined us in this effort. The project includes the entire building lifecycle from construction to operation to demolition. Lafarge is the world’s largest cement producer, and UTC is the largest capital equipment supplier to buildings. The work recognizes that buildings worldwide consume more than a third of our planet’s energy annually and that intensity reductions of a third or more are already in sight.
The proposed ultimate project goal is buildings which are energy self sufficient, zero CO2 emissions, and commercially viable by 2050.
The first year’s summary report was published in October 2007. The report concludes that all participants in the building cycle can immediately drive down world energy demand and reduce carbon emissions using technologies and knowledge available today.
Key opportunities for change include the integration of individual technologies and innovations, commitment across the building’s life and increased understanding of the cost to benefit ratio to invest in building efficiency. Work over the next year will focus on “zero net energy” building designs and applying these to the world buildings data set. A zero net energy building produces as much energy as it uses over the course of a year.
The third and final phase of the project will commit to actions that will move the building industry toward zero net energy buildings and invite others worldwide to join in the effort.
Since 1990, the world has nearly doubled its annual consumption of energy while simultaneously decreasing use of energy through efficiency improvements. Significant changes are necessary to offset the environmental impact of this rate of growth.
The International Energy Association projects that Building Energy consumption could be 1/3 lower than a projected business-as-usual baseline by 2050 by taking available and projected improvement in technology measures forward.
The three key elements that the WBCSD energy efficiency in buildings project identified in order to achieve zero net energy include 1) Using less energy; 2) Making more energy (locally) and 3) Sharing surplus energy. The technology to do these things is available today, including in some of the UTC products I’ve highlighted today.
A potential barrier to moving ahead with the design and construction of energy efficient buildings is perception of the cost/benefit relationship by building developers around the world, including here in China.
The EEB project conducted market research of building sector stakeholders showing a two-fold under-appreciation for building’s use of energy, with respondents in China estimating that buildings account for 20% vs more accurate WBCSD estimates of 30% in total emissions for buildings in China.
And estimates of the increased cost for building efficiently are over-estimated significantly by a factor of 5 to 1. Respondents here in China estimated the additional cost of designing and constructing efficient buildings was an extra 28% of the construction costs while our estimates, based on actual data here at our new Otis facility in Tianjin, are on the order of 5%.
So the message is simple: the cost of building things right is much less than you think, and the benefits are much more significant.
Opportunities for change include an integrated approach to building development and usage, developing incentives around building energy performance and the need to educate and encourage building professionals and users to use environmentally sound design and practices.
And the WBCSD EEB work relative to China is especially encouraging. Last week, we held a multi-stakeholder scenario workshop at Tsinghua University, at the Tsinghua’s Building Energy Research Center.
This workshop will help the EEB to develop a broad-based analysis, inclusive of China, that will help us to model policy, business, and technology pathways for getting to zero net energy buildings.
In closing, I want to reiterate the EEB project’s key theme of an integrated approach to building development. Investors, owners, systems providers and occupants often have different incentives; an integrated approach must consider energy use over the whole life cycle of the building. Involving all parts of the building life cycle, from material production, to construction, …to actual building use and end of life is necessary to meet the aggressive ‘zero net energy’ goal. Shared responsibility and accountability toward energy performance is necessary to achieve this significant goal.
UTC has a set of commitments to sustainability that touch a broad range of our business activities, from suppliers to product development to how we design our factories. China’s Five Year plan is also engaging their cities, state-owned enterprises and provincial party leaders to commit to environmental goals.
The Chinese 5 year plan, including recent updates to focus on conservation, address the variety of key stakeholders in a call to action –individual conservation, provincial government accountability, enforcement, training and job performance at a local level.
Premier Wen Jiabao recently spoke to the importance of this effort – he indicated that “Resource conservation and environmental protection must continue from generation to generation to make our mountains greener, waters cleaner and skies bluer."
We couldn’t agree more.
So my message is simple. The science, markets and financial returns for companies like UTC to commercialize technologies to reduce energy consumption and green house gas emissions are striking, visible and real, and can provide tangible solutions today.
We are proud to be China’s partner moving ahead with these important energy initiatives and projects.
I want to recognize the efforts of the Ministry of Construction for their continued focus on these issues. Their attention to the environment and climate change while the Chinese economy undergoes dramatic growth deserves the world’s recognition and respect.
UTC shares your goals and looks forward to continued partnership with you. As a key stakeholder in China’s environmental goals, we share your long term commitment to economic growth with a relentless focus on sustainability and long term environmental solutions. Thank you.
