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McKinsey: Wang Yusuo, ENN Group, discusses clean energy in China

Excerpts from the July issue of the McKinsey Quarterly:

(Illustration via McKinsey Quarterly)

“Cleaner energy for China: An interview with the chairman of ENN Group”
By Michael Wang is a principal in McKinsey’s Shanghai office, where David Xu is a director.

July 2008

China has a reputation for relying on heavily polluting energy sources, such as coal. But efforts by innovative Chinese companies are under way to convert the country’s abundant coal supplies into sources of cleaner energy. One of these companies is the privately held ENN Group, better known in China for its subsidiary XinAo Gas, which is listed in Hong Kong. The chairman of ENN, Wang Yusuo, founded the company in 1989 as one of the country’s first natural-gas distributors; its debut project was piping gas to the city of Langfang, in Hebei Province. ENN, which now has more than 20,000 employees, supplies natural gas to more than 40 million people in nearly 70 cities in China and liquefied natural gas to filling stations in more than 20 Chinese cities.

The Quarterly: Why did you enter coal chemical engineering and clean energy?

China has an increasing need to develop clean-coal technologies, since the country is rich in coal and poor in oil and gas. Coal accounts for over 70 percent of China’s total energy consumption, but the use of coal in power plants has created serious environmental pollution because of high emissions of carbon dioxide, among other pollutants. In the 1960s, China pursued an energy strategy focused on oil and gas instead of coal. That made coal-based clean energy a huge business opportunity.

The Quarterly: How has ENN developed its clean-energy business in China?

Wang Yusuo: We have focused on three areas. First, through our subsidiary XinAo Gas, we distribute the clean energy produced by others. Second, we are involved in producing clean energy ourselves by building production bases for methanol in various parts of the country, usually close to coal-mining regions, and by rolling out dimethyl ether plants, which use methanol as the raw material. In addition, ENN established the world’s first commercial dimethyl ether filling station for buses, in Shanghai, in 2007. We’re also increasing our investment in solar energy. We imported a photovoltaic-module production line from the United States and expect to launch a new-generation product within two to three years.

Finally, we are aggressively pushing for the greater use of clean energy. In response to the Chinese government’s environmental policies, we’ve proposed an energy-saving and emission-reduction plan in an attempt to be the nation’s clean-energy service provider. This plan integrates biomass, solar, geothermal, and methane into a package for a given city’s households and businesses. The idea is that the city could benefit environmentally through the use of multiple energy sources.

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