July 23 (Bloomberg) -- Three years after passing the U.S. to become the world’s biggest air polluter, China’s investments in green energy technology are boosting orders for Western power-grid builders like ABB Ltd. as their home markets slump.

Backed by a 4 trillion-yuan ($585 billion) economic stimulus package, the most populous country on Earth is targeting a 21 percent increase in spending on power transmission this year. Siemens AG, Alstom SA and General Electric Co. are also among those finding Chinese buyers for their most-advanced equipment.

“The Chinese always want to buy the best,” ABB Chief Executive Officer Joe Hogan said in an interview. “They force us to push the envelope on the technology.”

Clean sources of energy will be used to generate about 35 percent of China’s electricity by 2020, according to Liu Zhenya, the head of State Grid Corp. of China, the nation’s biggest electricity provider. Currently the country’s 1.3 billion people get about 80 percent of their power from coal-fired plants.

“China’s enormous demand for energy continues to drive their desire to install state-of-the-art energy equipment that is cleaner and more efficient,” Jack Wen, CEO of GE Energy China, said in an e-mail.

The shopping spree includes some of the most advanced transmission technology being built. Siemens, Europe’s largest engineer, is currently delivering the world’s first 800-kilovolt transformers for extra-high-voltage transmission systems in an order valued at more than 300 million euros ($426 million).

Bigger than a two-story family house, they help limit energy loss as Chinese utilities move power from inland hydropower plants to coastal cities. Standard networks operate at 500 kilovolts.

Rapid Follow-Through

China’s technology drive contrasts with slumping domestic demand for the power-grid builders. At Munich-based Siemens, new orders in China increased 43 percent in the quarter through March while they fell 14 percent in Germany. ABB’s second- quarter sales fell 10 percent in local currencies in Europe and rose 4 percent in Asia. It doesn’t report on China separately. The Swiss company’s total orders slipped to $7.31 billion, short of a $7.85 billion estimate from a Bloomberg analyst survey.

The country became Zurich-based ABB’s biggest market in 2007 and revenue there increased 21 percent to $4.1 billion last year. Siemens’s revenue in China rose 19 percent in the year through September. Alstom is targeting annual power orders in China of 1 billion euros.

“In China, there’s a rapid follow-through from planning to construction whereas in Western markets -- the U.S. -- more time has to elapse as governments contend with local planning and possible opposition from citizen organizations,” said Alessandro Migliorini, an analyst at Helvea SA in Geneva.

‘Conservative’ West

Meanwhile, the U.S. and Europe “have become a little conservative about deploying some of the new technologies in electrical engineering for a while, like increasing voltages,” Peter Terwiesch, ABB’s chief technology officer, said in an interview. By contrast, the Chinese have “actually had to evolve their grid very significantly and in many areas defined levels of requirements we haven’t seen anywhere else.”

China remains a long way from being a clean-energy champion. The country became the world’s biggest emitter of carbon dioxide gas in 2006, according to U.S. Energy Department data. Chinese coal consumption to power plants and electric grids rose 7.1 percent in 2008, adding 366 million tons of carbon dioxide to the atmosphere, calculations based on data published by BP Plc show.

Wind Power

Change is coming. More-efficient power networks and wind parks are helping fight air pollution. A compact ABB substation, distribution transformers and ring main unit enable the country’s biggest wind farm, Jiangsu Rudong on the Yellow Sea coast, to feed about 230,000 megawatt-hours of electricity each year into the transmission network. That avoids 200,000 tons of CO2 emissions annually.

GE, whose energy unit has been in China for more than a century, is getting in on the act through wind power and more efficient transmission. The American company is the second- biggest producer of wind turbines after Vestas Wind Systems A/S of Randers, Denmark. Siemens also makes wind turbines, while ABB is involved in the Huitengshile wind park in Inner Mongolia.

“They’re accelerating green-emerging investing, like the smart grid” -- a system using digital technology to manage the flow of power, GE CEO Jeffrey Immelt said on an April call.

GE, based in Fairfield, Connecticut, doesn’t break out country-by-country sales for its units. As a whole, the company had $4.7 billion in revenue from China in 2008, almost 15 percent more than a year earlier.

Vestas said in June that it plans to boost the number of employees in China to 3,000 by year-end from about 2,000 last year, helped by rising demand, as the country’s wind-power capacity increases.

Air Pollution Battle

Siemens is aiming for 10 percent annual increases in sales of products that save energy and cut pollution from China and elsewhere. The company targets 25 billion euros in revenue from energy-efficient motors and lighting as well as wind turbines and high-voltage transmission systems in 2011.

“Where is Siemens selling its most advanced equipment? The most advanced equipment is sold in China,” Siemens CEO Peter Loescher said in a June speech in Washington.

To contact the reporter on this story: Antonio Ligi in Zurich at aligi@bloomberg.net

Last Updated: July 23, 2009 02:36 EDT