Power-hungry China beckons smart energy startups

China has undergone rapid development and seen tremendous economic growth in the past decade, but behind the country’s urbanization is increasing demand for scarce energy resources. This is forcing the power-thirsty country to rethink how energy is consumed and managed.

China is currently the top electricity user in the world and its rate of consumption is speeding up. According to official data, electricity consumption rose by 6.6% in 2017, faster than the 5% increase in 2016World Resources Institute estimates that as Chinese cities continue to develop, energy used by buildings will increase by as much as 40% in the next 15 years.

Electricity consumption in 2016 (Source: Global Energy Statistical Yearbook 2017)

Globally, buildings use up about 70% of electricity and waste 60% of it—around $100 billion of electricity loss each year. That is a staggering amount of energy wasted through outdated and inefficient appliances and broken equipment. Not only a massive cost in financial terms, the environment is also paying a high price. According to China’s National Development and Reform Council (NDRC), more than 70% of China’s carbon emissions come from cities, and nearly one-third of that comes from powering the buildings sector.

The government has proposed ambitious plans to promote smarter energy use in urban cities, buildings, and factories—the 13th Five-Year Plan prioritizes building efficiency which requires 50% of all new urban buildings to be “certified green buildings”.

The country’s buildings sector is expected to continue to grow rapidly in the coming two decades. As urban cities expedite the transition to sustainable green buildings, more opportunities are opening up in the smart energy sector. 

An IFC report suggests that following through on these commitments would grow the country’s green buildings sector from 5 to 28% by 2030, representing a $12.9 trillion investment opportunity.

Recognizing the potential in the smart energy sector, the government, capital markets, and industries are more open-minded to innovative energy solutions than before.

Reinventing urban cities in with technology

Large buildings and facilities play an increasingly prominent role in energy consumption, that is partly why the concept of smart city and smart manufacturing has gained so much attention in China in recent years. With the push from the government, more than 500 cities in China has set an agenda toward smart city transformation. And artificial intelligence (AI), internet of things (IoT), as well as big data applications are indispensable piece to the smart city puzzle, and perhaps, they also play a key role in decarbonizing China’s economy.

In 2016, the Hangzhou government teamed up with Alibaba and Foxconn and launched the City Brain project, which aims to help the urban cities “think” using AI and big data. Using Alibaba Cloud’s computing power and data-processing, City Brain is capable of performing real-time analysis of the city, automatically deploy public resources, and amend defects in city operations. Recently, Alibaba announced that it is taking City Brain overseas for the first time to launch in Malaysia’s capital, Kuala Lumpur.

US-based IoT startup set to green Chinese urban buildings and factories

What makes a building smart is the ability to “think.” US-based IoT startup Verdigris has worked out how to make concrete buildings come alive. The startup provides an AI-powered energy management platform capable of running energy consumption analysis on data pulled from smart sensors clamped onto electrical circuits on large facilities and buildings. The system sends real-time energy consumption data to the cloud, which can be accessed via web dashboards.

Real-time electricity consumption data via web dashboard (Image Credit: Verdigris)

While most buildings rely on occasional—as well as ineffective and time-consuming—walk-through energy usage audits, Verdigris utilizes wireless sensors and AI to monitor patterns and detect for anomalies 24/7.

IoT hardware set (Image Credit: Verdigris)

The startup is backed by Stanford StartX Fund, NASA, Jabil, and Founder.org Capital. Back home, Verdigris has already seen success in the hospitality, healthcare and manufacturing sectors. Their technology has implemented by hotel conglomerates including Hyatt and Intercontinental, and chip maker NVIDIA to reduce energy consumption. Their innovative technology has helped Jabil, the global manufacturing services company, to cut its energy use by over 50%.

Now the Silicon Valley startup is making its way to Asia. “We have a lot of inbound interest from the Chinese market,” Mark Chung, founder and CEO of Verdigris tells TechNode.

On his recent trips to Asia, Chung and his team started to “better understand how hungry the market was for a solution like ours and how much more impetus we needed to place on developing the right channel partners in China.”

Chung said they have already spoken to a number of large property holding companies in China who are quite eager to implement their technology. “The demand [in China] is really because the government puts a lot of pressure on these companies to really improve their energy efficiency,” Chung explained. And it’s not just the building sector. Industrial production and manufacturing, two notorious energy users, are also transitioning to efficiency and sustainability. For smart energy companies like Verdigris, “manufacturing is going to be a big area in China,” said Chung.

Entry hurdles

Even though the Chinese market is open to foreign technologies, Chung recalls when they started installing their systems in China, they almost immediately ran into the aversion “to data being exported out of the country,” as Chung puts it

The Chinese government began tightening its cybersecurity regulations last year to clamp down on companies that store Chinese user data overseas. Foreign tech companies, including Apple and Amazon, are coming up with solutions to comply with local laws as exporting user data out of the country is frowned upon. “It becomes really difficult to run US-based cloud services in China. There are a lot of regulatory challenges to overcome, and so solutions should be engineered to overcome those regulatory challenges.” Chung said they are still working on a long-term scalable solution that meets the regulatory requirements in China.

China is a massive but challenging market to navigate for startups in the smart energy space, even more so for those from overseas. But things are looking up. If China wants to transition into an energy sustainable economy, the private and public demand for smart energy will grow. Startups and companies looking to capitalize on the growing area of opportunity should bear in mind the problem-solving nature of technology and think about how the design and integration of intelligent systems fit into China’s rapidly transforming urban environment.