Without Leadership, Chaos Plagues the Energy-Saving and Environmental Protection Industry

　　The once-every-five-years National Environmental Protection Conference will be held at the end of this year. According to relevant media reports, the "12th Five-Year Plan for the Development of the Energy-Saving and Environmental Protection Industry" will also be released at this environmental conference. The contents of the plan, such as tax reductions and exemptions for energy-saving and environmental protection enterprises and the enhancement of industrial concentration, will become highlights of industry attention. Since China's energy-saving and environmental protection industry is in its early stage of development, despite the strong calls for the energy-saving and environmental protection industry, those familiar with the industry deeply feel that various disorders exist in the energy-saving and environmental protection industry, seriously hindering the healthy development of the industry.

　　Information Opacity — The Industry Environment Needs to Be Cleansed

　　The real-world pressure of "energy conservation and emission reduction" has given birth to the energy-saving and environmental protection market. Most of the demand in this market is "forced out." The energy-saving and environmental protection industry is highly dependent on policy. Government departments hold first-hand information on the key fields, key industries, or enterprises that need energy-saving and emission reduction projects, and the standards for drawing up lists are also in the hands of the competent authorities. Around these government competent departments, a number of auxiliary public institutions, industry associations, and temporary working bodies form a complex chain of interests. At the same time, energy-saving and environmental protection projects often have to go through several procedures such as filing, scheme design, project approval, and bidding, and the units seeking projects face the possibility of being "blocked, squeezed, and demanded upon" by multiple parties. In such an industry environment, enterprises that can manage their relationships with all parties can thrive like fish in water; otherwise, a slight misstep may encroach upon the "cheese" of certain people. In such an environment, "small fries blocking the way" happens from time to time. Even some international giants have to bow their heads, or simply act as upstream suppliers, leaving the relationship-handling to those with expertise. This is the reason why some multinational corporations with considerable technical and financial strength are unwilling to undertake energy management contract projects — they would rather only provide product supply and technical support. Multinational corporations have realized that either they focus on selling products, or, if they engage in public relations, they need to work at a high level. This may explain why Fortune Global 500 companies such as Siemens, Schneider, and ABB choose to locate their regional headquarters in Beijing rather than in Shanghai or Guangzhou, where the markets are relatively mature.

　　Protectionism Prevails, Market Expansion Hindered

　　Protectionism in the energy conservation and environmental protection sector is reflected not only between different regions but also between different systems within the same region. The fragmented landscape has led many enterprises to guard their own small territories, with no incentive to expand their businesses outward. Enterprises genuinely willing to expand their markets run into walls everywhere. Take the sewage treatment industry as an example: to nurture local companies toward listing, some cities bundle municipal projects such as sewage treatment and hand them to local state-owned enterprises, which are then packaged and listed, making it very difficult for sewage treatment companies from other regions to enter. These enterprises are themselves small in scale and lack strong expansion capabilities, resulting in a low level of concentration across the industry as a whole, lacking large enterprises with comprehensive competitiveness that can truly compete with international giants. The energy-saving service industry provides another example: some key energy-consuming units insist on establishing energy-saving service companies under their own control, converting original energy-saving retrofit projects into energy management contract arrangements, ensuring benefits stay in-house while also gaining access to more government funding. This is essentially meaningless for developing the third-party energy-saving service industry, marking a return to the old path of enterprises running their own social services.

　　Lack of Leading Enterprises, Difficult to Compete with International Giants

　　According to the "Research Report on the Development of China's Energy Conservation and Environmental Protection Industry" released by the Global Energy Conservation and Environmental Protection Network, currently, China's energy conservation and environmental protection enterprises are generally small, lacking leading flagship enterprises. Even larger energy conservation and environmental protection enterprises mostly have annual revenues between 2 to 3 billion yuan, still a considerable gap compared to international giants. To develop the energy conservation and environmental protection industry, an important task in the next five years will be to cultivate a batch of leading energy conservation and environmental protection enterprises with annual revenues in the range of 5 to 10 billion yuan.

　　For energy conservation and environmental protection enterprises, mere scale is not enough; cultivating leading enterprises with core competitiveness is key. Relying solely on the merger and reorganization of a few state-owned enterprises cannot truly break through the bottlenecks of the industry. In the short term, the core competitiveness of energy conservation and environmental protection enterprises depends on policies and relationships, but in the long run, the fundamental support for these enterprises to grow and become stronger lies in technological R&D capabilities, overall integrated application capabilities, and cross-regional capital operation capabilities. China's energy conservation and environmental protection enterprises still have a long way to go before they can stand shoulder to shoulder with international giants such as Siemens, Schneider, Veolia, and Suez.