By Peter Löscher, President and CEO of Siemens AG


1.The shift to sustainability

A fundamental change is sweeping the global economy today, a change the communiqué issued by the G20 countries at their April 2009 summit describes as "the transition towards clean, innovative, resource efficient, low carbon technologies and infrastructure."  Two factors are driving this "shift to sustainability."

First, climate change. There's no doubt that human activity is causing global warming, and there is evidence that this may be happening at a much faster rate than expected. Researchers at M.I.T., who were previously predicting a temperature rise of a little more than 2 degrees Celsius by the end of this century, are now predicting a rise of more than 5 degrees Celsius. Also: "There's growing evidence that climate change is self-reinforcing."  Clearly, collective global action must be taken to avoid catastrophic consequences. And this action must be taken now.
Second, the economic crisis: it has intensified and accelerated this debate. In effect, it has led to a new global consensus that sustainability is not just an ecological issue, but equally an economic and social issue.

The G20 summit not only reflected this change in attitude; it also resulted in a substantial financial commitment to sustainability. The G20 countries have allocated an estimated total of about €400 billion to green technology and sustainable infrastructure.

In a more concise way, Beijing's aim to build a "world-class city” conveys the sustainability message as well. Today, a world-class city must be a sustainable city. Investment decisions made today in favor of environmental protection and sustainable urban infrastructure will determine the competitiveness and attractiveness of cities tomorrow.


2.The path to sustainability in four key urban infrastructures

2.1 Transportation

Since I extensively discussed transportation in my 2008 contribution to the Beijing International Business Leaders Advisory Council, I will only summarize our key findings in this report.

    •One of the key findings of the Megacity Challenges Report  was that transportation overtakes all other infrastructure concerns.
    •The 500 respondents identified transportation as by far the biggest infrastructure challenge and air pollution as the No. 1 environmental issue.
    •In a more recent survey prepared for The U.S. Conference of Mayors, cities identified public transportation (63 percent) as the most promising transportation policy for reducing emissions.
    •Transportation has the strongest influence on the competitiveness of cities. Of the surveyed stakeholders, 27 percent rated it as the most important factor in attracting economic investment, far ahead of the second most cited issue (safety and security at 9 percent).

The improvements to the public transportation system made in Beijing for the 2008 Olympic Games are a good start. Yet Beijing continues to face formidable challenges, for example, heavy traffic congestion and its adverse impact on the environment as well as inadequate traffic safety and the lacking integration of different transportation modes. London and Vienna, as well as several other cities, are good role models in the area of transportation, but ultimately solutions will have to meet the specific needs of Beijing. Developing these solutions will require diligence and creativity on the part of city administrators, and partners like Siemens who are able to design and build large-scale sustainable urban infrastructures and who are willing to cooperate closely with local officials.

2.2 Energy

Any discussion of sustainability has to address the exploding global demand for electricity. Since the generation of electricity accounts for two thirds of the global CO2 emissions, it is the single biggest factor in mitigating climate change.

Right now, over one billion people worldwide do not have access to electricity. This will change. Electricity generated worldwide will soar from 21,000 terawatt hours in 2008 to 37,000 terawatt hours in 2030. Most of this exploding demand will arise in the developing world, especially in rapidly growing economies like China. China faces the enormous challenge of meeting the demand for electricity while at the same reducing emissions.

Energy efficiency

The fastest and most effective answer to this challenge is energy efficiency along the entire energy conversion chain – that is, in the generation, distribution and consumption of energy.
In the area of generation, the Huaneng Shanghai combined-cycle power plant is one of the biggest plants of its kind in China. With three advanced gas turbines from Siemens, the plant has a total output of 1,200 megawatts, and most importantly its net efficiency rating is 58 percent. In 2007, this plant was named Best Gas Power Plant in Asia. But the efficiency of older plants can be boosted as well. Siemens has redesigned the control systems of existing combined-cycle power plants so that they can be started up and shut down much faster. This is nothing more than a software upgrade; hardware does not have to be replaced. It enables the power plant to reach full capacity within 30 minutes and pays for itself within one year.

In the area of distribution, High Voltage Direct Current (HVDC) is the most energy-efficient and therefore eco-friendly technology. Not too long ago, Siemens unveiled the world's most powerful transformer. It operates at a voltage of 800 kilovolts and reduces transmission loss by about 30 percent. This technology is being deployed in China by Siemens: 5,000 megawatts generated of hydroelectric power in the country's interior will be transported over 1,400 kilometers to the megacities on the coast. With this "electricity superhighway,” 95 percent of the power arrives at the load centers. By contrast, using traditional alternating current lines, approximately 400 megawatts would be lost during transmission. That's equal to the output of a medium-sized power plant or 160 wind turbines and CO2 emissions of three million metric tons per year.

In the area of consumption, every light bulb, every household appliance, every industrial motor makes a difference on a macroeconomic scale. That's why our company closely examines the efficiency of every product over its entire life cycle. Life cycle assessment showed us that the use phase of appliances, for example, typically accounts for well over 90 percent of their energy consumption – and their emissions. And appliances account for roughly 40 percent of total residential energy consumption worldwide. If all household appliances in Germany were replaced with the most energy-efficient models, 22 terawatt hours would be saved. That’s equal to the energy consumption of 13 million households; and Germany could shut off six mid-sized power plants.

Buildings account for about 40 percent of energy consumption worldwide and for approximately 21 percent of all greenhouse gas emissions. So, it's crucial to address this potential. The 2007 report of the Intergovernmental Panel on Climate Change (IPCC) estimates that more efficient technologies could reduce the CO2 emissions of buildings by up to 40 percent by 2030. A large share of this reduction is attainable by implementing relatively simple measures.

As China's national center of government and as an international center of commerce, Beijing is experiencing a tremendous increase in the number of high-rise buildings. This construction boom is a great opportunity to make existing and new buildings "green." I commend Beijing municipal leaders for commissioning the joint study “Low-carbon Urban Development for Beijing.” The study will identify and quantify the energy-efficiency potential of "green buildings" for Beijing.

Renewable energy

Energy efficiency is the first answer. The second answer is renewable energy. Growth in this area is phenomenal. By 2030, roughly 40 percent of the worldwide investments in the power plant market will be used to develop renewable energy sources.

For instance, since 2004, wind energy deployment has risen dramatically. Global installed capacity increased from 40,000 megawatts at the end of 2003 to 94,000 megawatts at the end of 2007; that's an average annual growth rate of nearly 25 per cent.

The challenge here is to make the transition to an integrated energy system that accommodates all types of power generation, in particular, renewable energy. China could be the first country worldwide to deploy this kind of integrated system on a national scale, and it would give China an energy supply with maximum overall efficiency and security and minimum environmental impact.
Making the transition to an integrated energy system that supports a larger share of renewable energy will require three steps:

First, optimizing the energy mix

In the foreseeable future, all primary energy sources will be needed to maintain a stable and sustainable supply of electricity worldwide, and it will be critically important to continually optimize the mix of these sources. This will mean steadily increasing the share of renewable energy sources, such as wind and solar, as well as further optimizing fossil-fuel power generation with carbon capture technology that separates and stores CO2.

An optimized energy mix will typically consist of the following power generation technologies:

    •Wind, solar thermal, and photovoltaic power generation with privileged feed-in

    •Highly efficient, low-emission, fast startup gas-fired combined-cycle power plants for load leveling

    •Coal-fired, solar thermal, IGCC (with pre-combustion capture and post-combustion capture), nuclear and hydro power plants for the base load.

Our company is supporting China in optimizing its energy mix. 

    •With an initial investment of RMB 581 million (€64 million), we have entered China's wind power market. Siemens Wind Power Blades Co., Ltd. will initially produce seamless blades for
2.3 and 3.6 megawatt wind turbine plants at a rate of 500 megawatts annually to meet China's rising demand in this area.

    •To compensate for the fluctuations of renewable sources and to meet peak loads, highly flexible combined-cycle power plants can be fired up in a matter of minutes and quickly produce large amounts of electricity.

   •With Carbon Capture and Storage (CCS) technology, up to 95 percent of the carbon dioxide contained in fossil fuels can be captured and subsequently stored permanently underground.
Second, improving efficiency

Improving efficiency along the entire energy conversion chain is essential to a reliable and sustainable supply of energy, as outlined above. Technical improvements of individual components of the energy conversion chain can reduce the consumption of fossil fuels and increase the output of renewable energy sources.

The latest generation of combined cycle power plants, for example, has an efficiency rating of over 60 percent compared to 58 percent in current plants. By consuming less fuel, each new plant can reduce CO2 emissions by an amount equal to that produced by 10,000 cars driven 20,000 kilometers a year.

There's also room for improvement in renewable energy as far as efficiency is concerned. By using state-of-the-art 3.6-megawatt wind turbines instead of the 1-megawatt units currently standard in the industry, wind power can be far more effectively exploited.

Third, optimizing the energy system

The third stage in making the transition to an integrated energy system is to optimize the system by making it a so-called "smart grid," a grid that enables consumers to draw and producers to feed in electricity.

While there is a strong push for lower energy prices, higher energy efficiency and the increased use of renewable energy, large parts of today's power grids are reaching the end of their usefulness. Both from a technical and economic standpoint, this outdated technology will be unable to effectively meet tomorrow's requirements. Load fluctuation is a major problem in existing power grids; many are already operating at peak capacity. The feed-in fluctuation associated with weather-dependent renewable sources of energy (primarily wind and solar) compounds this problem.

Smart grids address this problem by integrating large, centralized power generation units and small, decentralized units into a comprehensive, intelligent system. Advanced sensors and a decentralized information and communications system are two smart grid features that make this possible. This functionality enables the smart grid to increase the efficiency, reliability and security of the entire power supply chain.

In short, tomorrow's power grids will have to meet stiffer requirements.

    •They will be responsive to the changing needs of users. And users will have greater influence;  they will be able to monitor power consumption and emissions, and to choose from various sources of energy. Providing this information and these choices will raise the environmental awareness of users, and it will give governments and power companies greater leverage in influencing the demand side.

    •Smart grids will provide access to the grid for a much greater variety of components. In particular, they will have to give preferential treatment to renewable energy and sources of energy with low carbon emissions.

    •They will be as reliable as today's power grids, resilient enough to handle failure of individual components, and secure against natural disasters and acts of sabotage.

    •Finally, smart grids must be economically attractive to power companies operating in a liberalized energy market by providing best value in a level playing field.

Equipped with modern control systems, electric cars could become a key component of smart grids. Since they can both store and supply electricity, they could act as mobile storage batteries for electricity generated from renewable sources. Just 200,000 electric cars connected to the grid would make eight gigawatts of power available very quickly. That's more capacity than currently needed in Germany.

The German power company RWE and Siemens will be cooperating in the area of electric vehicle technology. Our company will be implementing the infrastructure for electric cars, and over the course of the cooperation with RWE, Siemens will install 40 charging stations for electric vehicles at various locations in Germany. The focus will be on Berlin, with 20 charging stations. The experience gathered in this pilot project will be used to develop a larger infrastructure for charging stations.

To summarize: Although the shift to a sustainable energy infrastructure will require substantial investment in renewable energy sources and smart grids, this investment will pay off in the long term – both economically and ecologically.

2.3 Healthcare

Healthcare systems around the world are under pressure.

The world’s population continues to grow; it will increase from 6.6 billion today to 9.2 billion by 2050. At the same time, life expectancy has increased worldwide, not least due to advances in healthcare. As a result of this demographic development, global healthcare costs are expected to more than double from €2.3 trillion 2003 to €5.5 trillion in 2013. The costs of treating chronic illnesses account for a large share of this increase; according to the World Health Organization (WHO), treatment of chronic illnesses already makes up 60 percent of healthcare costs worldwide.

Healthcare in megacities reflects this global demographic change as well as their broader national environments. Clearly, providing both high-quality and affordable healthcare to all its citizens while containing cost will be a major challenge for Beijing in the near future.
The question then is: How can this be accomplished?

The first answer is to build and expand the healthcare infrastructure

Many countries lack adequate healthcare infrastructures. While hospitals consume the majority of these countries’ healthcare budgets, they frequently have deficiencies in medical equipment and competent management. And often, the geographic distribution of hospitals is uneven, leading to scarcity of healthcare services in some areas, and overlap and duplication in others. Skilled personnel is rare, which adds to the problems these countries face. To overcome these severe deficiencies, sizable investments in training and education, hospital facilities, and medical equipment are needed.

Many countries also lack medical products suitable for inexpensive production and distribution, as well as comprehensive immunization schedules to fight the threat of infectious diseases. Improvements to healthcare systems, which are currently incapable of guaranteeing equal access, are in dire need as well.

The second answer is to make efficiency a guiding principle of the healthcare system.
A well-designed healthcare system requires innovations that are capable of reducing costs and improving quality simultaneously, thus raising the benefit from health services for all. Combining the two is crucial, as cost alone is a poor indicator of results in healthcare. Balancing cost-consciousness with quality improvements requires financial incentives for cost containment.

It's also crucial to consistently evaluate healthcare delivery for efficiency to measure the success of particular schemes and strategies. Cost control is essential here, but accountability for treatment outcomes might be even more important in the long term. Placing more emphasis on outcomes and checking the effectiveness of procedures by a thorough tracking of the performance of all healthcare components has great potential to reduce overall costs. In no case should administrative costs be exempt from such evaluation. Their share of total healthcare costs is often extravagantly high. According to the World Business Council for Sustainable Development (WBCSD), administration accounts for 38 percent of U.S. healthcare spending.

Healthcare IT and workflow solutions can play a vital role in capping administrative costs. The widespread use of IT in healthcare could reduce costs and increase quality by reducing errors in medication, by improving decision-making and by accelerating workflows. Applications in the field of online medical data, prescriptions, and telemedicine would be a valuable help in meeting the challenges outlined so far. However, in healthcare, investment in IT requires a long-term, systemic perspective. Cost estimates for implementing a nationwide system of electronic health records (EHR) in the United States range from more than US$100 billion to almost US$300 billion, according to a survey by McKinsey. The cost-saving effects would obviously be huge as well, but this investment would not necessarily directly benefit the investors.

The third answer is to shift from acute care to early diagnosis and prevention.

On average, OECD countries still spend less than three percent of their health budgets on prevention, yet according to the World Health Organization (WHO), 17.5 million of 58 million deaths in 2005 were caused by cardiovascular illnesses. In 2015, it will be 20 million. Cancer is on the rise too. In 2005, 7.9 million people died of cancer, and the figure is expected to rise to 11.5 million by 2030. The earlier these diseases are diagnosed, the more effectively and thus cost-efficiently they can be treated. The WHO notes that a third of all cases of cancer could be cured if the disease could be identified early enough and effectively treated.

One method of achieving this involves comprehensive screenings that identify risks in healthy patients. Our company provides this kind of technology. It has been proven, for instance, that mammography reduces the risk of mortality from breast cancer. In its World Health Statistics (2008), the WHO states that universal availability of precautionary screening and associated counseling of at-risk patients could reduce the global mortality rate from breast cancer by 15 to 25 percent in women between 50 and 69 years of age. There are still no reliable figures available for many other illnesses, because the shift in focus to early diagnosis is just beginning.

2.4 Water

Water could be called the poor relative among urban infrastructures. Even though clean water is vital to human life, it is often taken for granted. The Megacity Challenges Report finds that while water and sanitation are seen as important issues by specialists in this sector, overall they are not a top priority for the respondents. Even in emerging cities, the importance of water for their economic development is not widely recognized. But city administrators should keep a close watch on the water infrastructure. It could be a ticking time bomb.

According to United Nations statistics, nearly one third of the world’s population, nearly 2.3 billion people, will face water shortages by 2025. More than 40 countries and regions will be affected, and China is regarded as one of the 13 countries in the world that will suffer the most severe water shortages.

The city of Singapore has an acute shortage of drinking water, as rainwater and groundwater meet only half of the demand; the rest is imported from neighboring Malaysia. Now, Singapore is turning to water treatment and Siemens to meet its demand. Our company came up with a water treatment plant that uses membrane filters and ultraviolet disinfection to convert wastewater into fresh, pure water. Recycling now produces 40,000 cubic meters of drinking water daily, and by 2012, Singapore plans to develop water recycling capacities for 210,000 cubic meters of drinking water per day in order to meet 20 percent of its total demand.

Clearly, the time has come to adopt a more sustainable water management system, and our company is committed to further supporting Beijing in doing that. We helped to increase the capacity of the water treatment plant in the north of Beijing to supply the Olympic Park with water. This system reuses wastewater, conserves potable water, reduces the discharge of wastewater, and per day produces 40,000 cubic meters of water that meets stringent quality requirements.

3. Green growth opportunities for Beijing

Beijing can benefit from the shift to sustainability in two ways: by investing in green technologies and by developing green technologies.

Investing in green technologies

Charged with the maintenance and upkeep of public buildings, municipal governments throughout the world have been the first to feel the impact of rising energy costs and to recognize that investments in energy-efficient technologies are the most effective way to keep these costs under control.

Energy contracting is an especially attractive approach in times of tight public budgets because it enables municipal governments to deploy energy-efficient technologies without having to make an up-front investment. It also demonstrates how economic and environmental goals can be pursued simultaneously in the crisis. The basic idea here is to use energy cost savings to finance up-front investments in energy-efficient technology.

The cooperation between Beijing Chaoyang District and Siemens Energy Contract Management is an excellent example of energy contracting. Here a government building is being overhauled to improve its energy efficiency. We hope this cooperation will act as a role model for future energy-saving initiatives for both public and commercial buildings.

Developing green technologies

Few Westerners are able to grasp the dimension and dynamism of China's metropolitan areas, and the differences between Western and Asian megacities in infrastructure and culture are great. In a way, China is ahead of the rest of the world as far as the scale, speed and complexity of urban development are concerned. And the methods applied in Europe and other parts of the world – whether they’re low-tech roadside systems, or high-tech license plate recognition – are sometimes too slow and or too complex for fast-paced China.

For the 2009 APEC CEO Summit in Singapore, Siemens sponsored a report that surveyed 270 sustainability experts around the world. They were asked, unprompted, to name up to three countries that today are today leaders in green technology. The respondents unequivocally consider Germany the leader today: it was mentioned by 60 percent of them, followed distantly by Denmark (26 percent), and Sweden (25 percent). They were then asked which countries will be the green technology leaders in ten years. The findings point to a resurgence of the U.S. (53 percent) and the arrival of China in a leadership position (50 percent).

Clearly, Beijing, as China's capital and as a world-class city, will lead in developing and deploying sustainable solutions. This will not only have a positive impact on Beijing's economy and urban environment; it will also benefit China as a whole.


* * *

The starting gun has sounded for the global race to develop the green technologies of the future. Germany has a head start with a 16-percent share of the world market. Europe's world market share is 45 percent. The United States is likely to be a strong competitor in the near term as well, as the government has already signaled its intention to allocate substantial funds to the research and development of green technologies. China, too, has joined this race; among developing countries, it's already the leader in climate change mitigation technology.

In 2008, the whole world watched the Summer Olympic Games in Beijing. And the world was amazed. Everyone agreed that these were one of the best Olympic Games ever. They were truly world-class. If Beijing is capable of organizing an event of such magnitude – and doing so with such perfection, then clearly it is capable of becoming a world-class city – a sustainable city.