China Energy Equipment Upgrading

On April 9, 2024, China’s Ministry of Industry and Information Technology (MIIT) together with six other departments jointly released a notice on The Action Plan for Promoting Industrial Equipment Upgrades. 

According to the action plan, China will boost capital investment in industrial equipment by more than 25, percent compared to 2023. The plan also aims to increase the penetration rate of digital R&D and design tools in major enterprises to above 90 percent, and the portion of production processes that are numerically controlled to over 75 percent.

The policy initiative will likely boost the scale of equipment upgrades across various industrial sectors, including in the energy sector. For example, the plan highlights upgrading advanced equipment in the solar energy sector, encouraging enterprises to update a batch of advanced equipment with high technology, high efficiency, and high reliability. The plan also encourages adoption of advanced equipment in the solar industry, including thermal field single crystal furnaces, high line speed and small wheelbase multi-wire cutting machines, all-in-one coating equipment, and large-size multi-busbar assembly string welding machines. This industrial equipment upgrading tide is expected to create opportunities for U.S. clean energy exporters that provide smart, green, and energy efficient industry equipment solutions.

Opportunities
The plan may lead to a stronger energy equipment system. This may result in an integrated energy industry chain, including power generation, energy storage, energy equipment transportation, energy efficient application, and deep energy resource exploration and development in the coming years.

Petroleum and Petrochemical Testing Equipment: The plan encourages petroleum and petrochemical firms to upgrade advanced equipment for pilot verification, testing, and process verification. Testing equipment includes equipment for model manufacturing, experimental analysis, mechanical testing, optical testing, environmental testing processing, environmental adaptability tests, reliability tests, process verification tests, safety tests, sample preparation, trial production, material processing, electronic assembly, and mechanical processing.

Industrial Energy Efficiency Equipment
The Action Plan promotes energy efficiency upgrades of key energy-consumption equipment. On January 29, the NDRC released the “Advanced Level of Energy Efficiency, Saving, and Access of Key Energy-Using Products and Equipment (2024 Edition).” Formally implemented on April 1, this policy guides procurement of government contracts. Furthermore, the Action Plan focuses on improving energy efficiency levels of boilers, motors, transformers, refrigeration and heating air compressors, and heat exchangers.

More to Come
Following the release of the Action Plan, some provinces released their own documents, indicating local government priorities.
For example, Zhejiang Province released their plan to invest more than 30 billion yuan by 2027 on creating new energy productivity. This includes accelerating the construction of a new energy system and eliminating backward production capacity. This plan aims to implement energy-saving standards for major high-energy-consuming industries and end-use products. Zhejiang Province hopes to reach the domestic advanced level in more than 80% of energy efficiency indicators. 

Challenges
The action plan mandates compliance with updated safety and carbon emissions standards and explicitly aims to use the standards-setting process to cull old equipment. This will likely necessitate unexpected expenditures for some companies that had not planned for upgrades, leading to possible waste. For example, the solar and electric vehicle industries have already seen massive investment in recent years, and the need for widespread equipment replacement or vehicle trade-ins is questionable. 
 

The prioritization of energy security in China’s energy sector is expected to stimulate equipment localization for the coming years, which could improve the local manufacturing level and stabilize energy supply. Although the action plan is expected to result in the upgrading and energy efficiency of petroleum and petrochemical industrial equipment, it may still take time to see if buyers will mainly seek international advanced equipment or if local products will play a bigger role.

For more information contact Office.Beijing@trade.gov