New Project Helps Companies in China Invest in Energy Efficiency Improvements

Under a new WRI initiative, industrial companies in China can bundle energy efficiency projects to attract investors and reduce costs.

WRI has launched a new pilot project focused on making energy efficiency improvements more affordable for industrial companies in China by “bundling” projects. By working together to secure funding and services for energy efficiency projects (“bundling”), companies can save time and money. China’s 12th Five Year Plan, covering 2011-2015, continues to prioritize energy intensity reductions via national targets, and this project may provide a test case for an innovative approach to achieving energy savings for small- and medium-sized energy efficiency projects in the future.

In March of this year, WRI and partners hosted a workshop introducing the project and the concept of “energy performance contracting”. Seventeen industrial companies in Shanghai expressed interest in participating. Energy performance contracts (EPC) are developed between industrial facilities and energy service companies (ESCOs) for energy efficiency services over time. This allows industrial facilities to benefit from making efficiency upgrades without having to make upfront capital expenditures.

The workshop included a wide range of experts and practitioners who need to work together to ensure success: plant managers, energy managers and engineers, finance managers, and environment, health and safety managers from 34 Chinese, American, and other international companies with facilities in Shanghai. Other representatives included financial institutions, NGOs, consulting firms, and pre-selected ESCOs. Experts presented on the topic of energy efficiency financing and energy performance contracting (EPC) and analyzed the benefits and risks of these approaches to participating companies.

Funded by USAID and the Alcoa Foundation, the workshop was co-hosted by the World Resources Institute (WRI) and its strategic local partners, Shanghai Jiao Tong University, the Economic Commission of Shanghai Minhang District, and the Shanghai Energy Efficiency Center.

Workshop participants also discussed the methods and process of bundling energy efficiency projects to attract investment, in addition to the benefits such as reduced upfront expenses and better pricing of energy efficiency services.

This workshop was well-timed with Chinese government’s new policy and approach to encourage energy performance contracting. The Economic Commission of the Minhang District Government confirmed that they will continue to support the project and will help secure participation of industrial companies in the district in the pilot.

In the next few months, WRI and partners will continue to reach out to the industrial companies who showed interest in participating in the bundling pilot, collect the information of individual potential energy efficiency projects, and together with companies develop and issue a request for proposal to finance and implement the portfolio of energy efficiency projects to attract proposals from qualified Chinese and International ESCOs.

The pilot project is exploring new models to accelerate investment in industrial energy efficiency projects that can be replicated in other regions and countries.