Market Transformation for Urban Energy Efficiency in China Project Manual By Energy Conservation Information Dissemination Center Global Environmental Institute and Battelle Memorial Institute 505 King Avenue Columbus, OH 43201 Supported by the Blue Moon Fund October 2010 LEGAL NOTICE This report was prepared by Battelle Memorial Institute (Battelle) as an account of sponsored research activities. Neither Client nor Battelle nor any person acting on behalf of either: MAKES ANY WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, with respect to the accuracy, completeness, or usefulness of the information contained in this report, or that the use of any information, apparatus, process, or composition disclosed in this report may not infringe privately owned rights; or Assumes any liabilities with respect to the use of, or for damages resulting from the use of, any information, apparatus, process, or composition disclosed in this report. Reference herein to any specific commercial product, process, or service by trade name, trademark, manufacturer, or otherwise, does not necessarily constitute or imply its endorsement, recommendation, or favoring by Battelle. The views and opinions of authors expressed herein do not necessarily state or reflect those of Battelle. Acknowledgments The project "Market Transformation for Urban Energy Efficiency in China" is funded by the Blue Moon Fund and primarily implemented by the Battelle Memorial Institute in the partnership with the Global Environmental Institute and the Energy Conservation Information Dissemination Center of National Development and Reform Commission. This manual was prepared by the project team, including Meredydd Evans, Bin Shui, Sha Yu, and Becky Shaaf from the Battelle Memorial Institute, Dr.Jianmin Zhang and Mr. Fangji Ru from the Energy Conservation Information Dissemination Center, and Benchi Guo and Dongying Wang from the Global Environmental Institute. In addition, Dr. Jiqiang Zhang, Christine Tsang and Billy McCarthy from the Blue Moon Fund provided extensive support to the project. Chongqing and Nanyang (Henan Province) were selected as pilot cities of the project. This manual drew in part from experiences of implementing the project in these two pilot cities. The project team recognized the Chongqing Municipal Government, Chongqing Development and Reform Commission, the Government of Nanyang City and Nanyang Development and Reform Commission for their generous support. The intermediaries China Energy Conservation and Environmental Protection Group -Chongqing Company and Nanyang Energy Conservation Center contributed greatly to the project implementation. In addition, the project team is grateful to China Energy Conservation and Environmental Protection Group, Huayu Private Equity Management Company, and Dr. Xuemin Xu from Huayu, who provided hands-on knowledge on building energy efficiency fund in China. Finally, the project team is also indebted to many institutes in two pilot cities as well as organizations in the United States and China. Market Transformation for Urban Energy Efficiency in China The acute energy shortage faced by many Chinese cities has dragged down local productivity and living standards. Cities are motivated to actively seek solutions to minimize the gap between energy demand and supply. The project aims to lay out a practical and replicable approach to promote market transformation of energy efficiency in China. Bulk procurements and financing of energy efficiency projects have emerged as promising mechanisms to build the energy efficiency market, while their development in China is still in their infancy. Based on available assets in China (such as local energy conservation centers and ESCOs), the project team worked with key stakeholders (city officials, financial institutions, buyers, suppliers, energy centers, etc.) to catalyze market transformation through cooperative efforts. The concept of project mechanism is originated from successful cases in developed countries. The project design is to promote energy efficiency market development in cities by mobilizing local resources and aggregating efforts of all stakeholders. The project brought together a range of stakeholders in each city, facilitating information exchange on past projects, collaboration for future projects, and overall momentum in support of energy efficiency measures. Figure 1 is an illustrative example of how the mechanism worked in Chongqing. Figure 1 Business Model in Chongqing 1 The project proved success in two pilot cities Nanyang and Chongqing. Both city governments have provided high-level support to the project and followed through with it. In addition, it helped shape the long-term strategy for energy development in Chongqing. The concept of Chongqing energy efficiency fund is being used as a template and starting point for a multibillion dollar national fund with investment from private and state investors. The project's presence significantly expanded the scale of the energy efficiency lighting program in Nanyang. By the end of July 450, 000 bulbs for three approved lamp models has been distributed and 200, 000 bulbs was the contribution of the project. This will save 28 million kWh. Moreover, there are more than 20 energy efficiency projects underway in two pilot cities which drew in part from the project design. Some key features for energy efficiency projects significantly contributed to the project success: o o o o o Active participation of stakeholders in the city High-level support from the city government Involvement of financial institutes in the early stage of project development Local intermediary to implement projects and coordinate on regular basis Energy audits and selected highly-efficient technologies 2 Appendices Appendix 1 Nanyang Task Report Appendix 2 Chongqing Task Report Appendix 3 Development and Status of Financing for China's Energy Conservation and Emission Reduction Appendix 4 Business Models for Market Transformation - Bulk Procurement and Energy Efficiency Fund Appendix 5 Technology Choice of Energy Efficiency Projects Appendix 6 Tables of Energy Audit for Energy Efficiency Projects Appendix 7 Energy Efficiency Market Transformation - Concept and Strategies Appendix 8 Business Planning for Energy Service Companies Appendix 9 Energy Efficiency Investment: Market, Financing and Risk Management 3 ?????????????? ?????????????????? ??????? ? ?????????? (Battelle Memorial Institute) 505 King Avenue Columbus, OH 43201 ???????????? (Blue Moon Fund) 2010 ? 10 ? LEGAL NOTICE This report was prepared by Battelle Memorial Institute (Battelle) as an account of sponsored research activities. Neither Client nor Battelle nor any person acting on behalf of either: MAKES ANY WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, with respect to the accuracy, completeness, or usefulness of the information contained in this report, or that the use of any information, apparatus, process, or composition disclosed in this report may not infringe privately owned rights; or Assumes any liabilities with respect to the use of, or for damages resulting from the use of, any information, apparatus, process, or composition disclosed in this report. Reference herein to any specific commercial product, process, or service by trade name, trademark, manufacturer, or otherwise, does not necessarily constitute or imply its endorsement, recommendation, or favoring by Battelle. The views and opinions of authors expressed herein do not necessarily state or reflect those of Battelle. ?? "????????????"?????????(Blue Moon Fund)???????, ???????????(Battelle Memorial Institute)???????????????? ??????????????????????????????????? Meredydd Evans,Shui Bin,Sha Yu,Becky Schaaf,??????????????,?? ????,??????????,??????,???????? Jiqiang Zhang, Christine Tsang, Billy McCarthy ???????????????? ????????????????,????????????????,????, ????????????????????????????,?????????? ??????,???????????????????????????????? ??????????????????????,? 2010 ? 2 ?? 2010 ? 7 ???? ??????,???????????,???????????????????? ?????????????????,????????????????????? ????????????????????,?????????????????? ?????????????????? ???????????? 1.???? ??????? 2010 ??? GDP ?????? 20%?????,2009 ? 11 ?,??? ?? 2020 ??? GDP ?????????? 2005 ??? 40%-45%???,????? ?,???????????????????????(Blue Moon Fund)??,??? ???????(Battelle Memorial Institute),??????????????????? ?????????????"??????????"?????????????? ??????????,???????????????????????????? ?,???????????,????????????????????????? ?,?????????????????????????? "??????????"????????,????,?????????"?? ?"?????????????????,???????????;??????? ?,?????????????????;????????????,?????? ????????????????????(????????? ESCO )???,? ????????(?????????????????????????????? ?)???,??????????? ????????? 2.?????????? "??????????"??????????????,??????????,? ???????????,??????????????????? 2.1 ???? ???????????????????(?? 1?? 2),??????????? ??????????????,?????????????? ???????????????,?????????????????,????? ??: ??????, ??????, ?????, ??????, ???????? ?????????????,?????????????,???????????? ?????????????????,????????????????????? ?????????,????????????????????????????? ??????????????????????,???????????? 1 I I IILJQ Ia' mfr; Ii: -v ZQFTITIGEEIH IIE 2 2 Q-.ji 3;-1 0 I I ???????,??????????????????????????????? ?????????????????????????,????????????? ??????????? ???????????,???????:??????,??????,????? ?,??,??????????????,??????????????,???? ???????? ???????,??? ESCO ????????????????????????? ??????????????????????????????????????? ????????????????????????????????,?????? ??????????????????????????????????,???? ???????????????,?????????????,????????? ?????????????????????????????????,????? ?????????????,????????????????????????? ???,??,????????????????????,?????? ESCO ?? ?,???????????,?????????? 2.2 ???? ????????,?????????????????????,???????? ??????????????????????????????????????? ??????,?????????(?????????)?????????,?? ??????????????? ??????,???????????:1??????????????????? ??;2????????????"Bulk procurement"??;3??????? (proven)????????,??????????????,?????????? ??????,????"????????"? 2.3 ???? ??????????,???????,???????????????????? ??????????,???????,?????????????????,?? ?????????????,???????,???????????????? 3. ????:???????????????? ?????????????????????????????????????? ?,??????????? 3 3.1 ?? ???????????,????????,?????????????????? ????????????? 40%,??????????? 32%??,"???"? ?,?????????????:? 2010 ?,????????? 2005 ?????? 20%? ???????,?????????????,????????????,???? ?????????????????????????,??? 8 ????????? ?????????,???????????,????????????????? ?,??"???"???????,????????? 20 ??? 3.2 ?? ?????????????????????,????????????????? ??????????????????????????????????????? ??? ?????????????????????????????,????????? 4 ????????????????,????????????????????? ???????,?:??????????????,??????? 10 ???? ?;????????????????;???????????????????? ?????????????????????????????????????? ????,????"???"?????????????????? 4. ????/???? ??????????,????????????,???????????,??? ??????????? 4.1 ?????"???"?? ???????(????????? ESCO )???,?????????(???? ???????????????????????????)???,??????? ???? ????????? 4.2 ????????? ??????????????,???????,??????????????? ??????????,????????????????,??????????? ???????????,??????????????????,???????? ??????,??????????????? 4 4.3 ?????????? ????????,????????????,????????????????? ????????????,?????????????????????????? ?????????????????,????????,??????,????? ???????? 4.4 ??????????? ?????????,??????????????,?????????????? ??????????????????????????????,???????? ???????????????????,????????/GEF ????????? ???????????,???????,???????????????? 4.5 ??????? ??????????????????????????????????????? ?????????????????????????????????????? ?,????,??????????????? 4.6 ???????????? ?????????????,????????:????????,??????? ?????????,???"????????"???????????????? ??????????????????????????????????????? ?,????????????????? 5 ?? ???:?????? ???:?????? ???:?????????? ???:?????????????? ???:?????????? ???:????????? ???:????????????? ???:?????????????? ???:??????????? 6 EW ????????????? ????????? ???? ?????????????????????????????????? ???????????????????????????????????? ?????????????,?????????????????????? ???????????????????????,???????????? ??????? ???? ???????????????????,?????????????? ????: (1) ????????????,??????????? CO2 ??; (2) ???????????????????????,????????? ???????????: ? ?????????????; ? ????????????; ? ????????????? ???? ????????????,????????,??????????,? ????????????????? 40%,??????????? 32%??, ?? GDP ??????????? 4 ?? "???"??,?????????????:? 2010 ?,?????? ??? 2005 ?? 1.36 ??????? 1.09 ????,?? 20%;??????? ????? 30%;??????????? 6.5 ??/?,?"??"??? 12.3%; 1 ?????(COD)??????? 6.51 ??/?,?"??"??? 27.3%;???? ??????? 90%,?????????? 70%;????????????? 75%? ???????????????,?????????????????? ??????????????????,????????????????? ??????????????,?????????,??????????? ???????? ???? (1) ???????? ????????,????????????????????????? ??????????:????????????????????????? ? GDP ?????(???)?????????(???)???????? ??????????????????????????? ????????????????, ?????????????????, ????????????,???????????,??????????? ????????? ?????????????????????????? ??????????????????????????????????? ????????????"??????????"?"???????" ? (2) ????? 2009 ? 3 ? 1 ?-3 ?,??????,????????????????? ????????????????????????????????,??? ??????,????????????????????????? ? ????,??????:?????????????,???????? ????????????,??????????????????????? ??,???????????,????????????????????? ??????????????????,????????????????? 2 ????, ????????????????????, ????????: ????????????,????????????????,?????? ???????????????????????????????????? ???????????????????????????????????, ???????????????????????????????????? ????????????? ?????????????????????????,???????? ?????,???????????????,????????????,? ???????????????????????????????????? ????,?????"bulk procurement"????????????????? ????????????????????? (3) ???? ??????,???????????:1?????????????? ???????;2????????????"Bulk procurement"??;3??? ????(proven)?????????????,????????????? ?:????? ???,?????????????????????????????? ?,???????????????"bulk procurement"????????? ??????????????"bulk procurement"???????,??? ???????????????,?????? 5 ????????????? ??????:1???????;2??????????;3???????;4? ????;5????????? 5 ???????????----??????? ??????????????? ?????????,????????????????????(??? ?????) ,??? 1? 3 ? 1 ???????????????(????????) (????) ???(??)?????? ??(???) 1?????? ???? 2?????? ? ? EMC ? ?, ????? ?? 3?????? ?????? ?????? ????, ?? ?????? ?????? ?????? ?????? ??? 1????? 2??????? 3???? 4???? 5???????? 6???? 1???(10 ?) 2???(10 ?) 3?????(5 ?) 4??? (5 ?) ?????? 1? 1140v ??????? (? ? 200 ?) ?????? , 2???????,???? (??) ,????? 3?5-??????????, ????,?????? 4???????(??) ;? ????????? 5???????? 6??????????? ?????? 1??? 1200-1800 ? kw/? 2??? 4000 ? kw/? 3???(??)1.2-1.5 ? kw/? 4??? 2000-3000 ? kw/? 5??????,???? 6??? 2000-3000 ? kw/? (????) ?????? (????) ???? (??????) 1?600-1000 ?? 2?6000 ?? 3?1.5-2.0 ?? 4?3000-4000 ?? 5?1500-3000 ?? 6????? 1.0 ?? (????) ????? (?????????) ? ? ? ? ???????? (?? 108) ?????????(?? 91) ?????? (?? 90) ? ? ? ? ? ? ?? 10-20 ????? 1? ??????? 15% 2? ???????(??) ?? 3000 ? kw/??? 3? ???????? 4? ???????? ???? 2.5-3.0 ? kw ??(?) :7-8 ?? 3000-5000 ?? ???? (?? 82,86) ?????? (?? 85) ?? 3-4 ??: (1)????,(2)????, (3)EMC ?? 4 (4) ?????? ??????????,?????????????????????? ??,???????????? 1: ???? ????? ?????? ???? ???? ?? ???? ???? ???? ???? ???? ? ...... ???? 1 ???? 2 ????? 1 ????? 2 ...... ?: ????? ????? (5) ?????? ????????,?????????????????????? 50 ??????????,??????????????? ????????????(??????) ????????????? ????????????????????????????????? ??????????????????, ?????????????? ????????????????????????????????,?? ??????????????????????????????????? ???????????????? 1 ??????????"???" ,?????? 5 ?????????? 2???(??)???????????(??) ????????(??)??????????????????????? ??????????????????????????????????? ??????????????: ? 1 ????????????? ???? ???(??)? ????? ???? 8w ??????? 11w ??????? 18w ??????? ?????????? (?? T8)18w ????(??) ???? ?????????? (?? T8)36w ?????????? (?? T8)16w ?????????? (?? T8)32w ?????????? (?? T8)18w ???(??) ?????? ?????????? (?? T8)36w ?????????? (?? T5)14w ?????????? (?? T5)28w ???? 150w ???? 250w ???? 400w ???? 8.2 8.5 11 5 7 32.5 57.5 4.9 6.9 33 45 55 55 72 ???? ???? 5.74 5.95 7.7 3.5 4.9 22.75 40.25 3.43 4.83 23.1 31.5 38.5 38.5 50.4 ???? ?? 4.1 4.25 5.5 2.5 3.5 16.25 28.75 2.45 3.45 16.5 22.5 ? 2 ??? 2009 ??????????????????? ?? ??? ?????? (??) 5 4 ?????????? (??) T5 ??? ?? T8 ?? T8 ?? ??????, ???? 1.5 ? ???? (??) 1 2 2 ??? ??? T5 ????? 2 ???T8 ?? 2 ??? T8 ?? 4 ??????? ???????????????????????????,?????? 6 3 4 5 6 7 8 9 10 11 12 13 14 15 ??? ??? ??? ??? ??? ??? ??? ??? ??? ??? ??? ??? ???? ?? 5 3 2 2 3 4 2 3 1.5 2 1.5 1 1 40 ??????????????? ?,????? ???,????????,?? ? ? ? ? ? ? ?? ????????????? 8 1.5 ??????????,????,???????????? ??????????????? 1500 ????,???????? 70kwh,40 ?????? 2800 ? kwh;????????????????? 3000 ????,???????? 28kwh,8 ?????? 224 ? kwh;??? ???????? 547.5 kwh ??,1.5 ?????? 820 ? kwh?????? ????? 3844 ? kwh,?? 13454 ????,?? SO2?CO2 ???? 225 ?? 33635 ?,????????? ????????, ???????????????????????? ??????????????????????,??????,????? ?????????????????????????????,????? ???????????,??????????????????? ???? ???? 1 ??????,????????????????????? ??????????: 1?????????????????????????; 2???????????????????????????????? ????????????????????; 3???????,??????(ESCO)?????????????? 7 ????????????????????????????????,?? ?????????????????(??:?????????????? ?;?????????????????) ,?????????????? ???,??????,????????????????,??????? ???????,???????? 3,???????????; 4? bulk procurement" " ???????????????????????, ????????????????????????????,?????? ?????????????????,????"bulk procurement"???; ???????????????????????????, ??????? ?????????????????; 5?????????????????????????????,?? ????????????,???????,?????????????? ????? 3 http://www.ndrc.gov.cn/zcfb/zcfbqt/2010qt/t20100408_339332.htm 8 IWWP1 3133113 2% ????????????? ????????? ???? ?????????????????????????????????? ???????????????????????????????????? ?????????????,?????????????????????? ???????????????????????,???????????? ??????? ???? ???????????????????,?????????????? ????: (1) ????????????,??????????? CO2 ??; (2) ???????????????????????,????????? ???????????: ? ?????????????; ? ????????????; ? ????????????? ???? (1) ?????? ??????,?????????????????????:????? ?????,?????????,??????;??,?????????? ?????,????????????????????????,????? ???????????:???????????????????????? ????????????,?????"??"?????----??????? 1 ?????????????,?????????????????????? ????,??????????????????????? (2) ????? ????????????????????, ????????????? ???????????????????????????????????? ???????? ?????????,2009 ? 9 ? 21 ?~22 ?,???????????? ????????,??????????????????????????? ??????????????????????????,????????? ??????????????????????????,????????? ???? ??????????????,??????????????????? ????,?????????????????????,?:??????? ??????????, ??????? 10 ?????; ??????????? ?????;?????????????????????????????, ???????????????????????? ????????,????????????????????????? ?,????????;??,????,????????????????? ??????,????????????????????????????? ?????? (3) ???? ??????,??????????????:1???????????? ?????????;2????????????"Bulk procurement"??;3? ??????(proven)?????????????,??????????? ?? 3 ??????:???????????????????,?????? 2 ????????????????; ??????????????? 29 ??? ???????,?????????????"Bulk procurement"?????? ?,??????????????????? ??????,??????????????????????????? ???????,????????????"???????????"??? ?????? (4) ???????? ????????????????????????,????????? ??? 1: ???? ???? ????? ???? ???? ???? ???? ???? ???? ???? ?: ????? ????? 1 ??????????"???" ,?????? 3 ???????????,?????????????????"???? ???????"???????????----??????????? 2010 ? 2 ? 2 ?,?????????????????????????? ?????????????????????,?????????????? ???????????????????????????????????? ????:???????????????????????????,??? ????;????,???????????"?????????????? ??" (????"????"),???????,????????????? ?????????"??????????"??????????????? ??????????????,????????????????????? "???????????"???? ????"????"?????????: ?? 1:??? ??????? (????) ?? 2:??? ??????? ???? ?? 3:??? ??????? ?? 4:??? ??????? ?? ??? 1 ??? 2 ??? 3 ...... ?????????? ?????????? ???? ???? ?? ???? ?? ????? ????? 4 ?: ????????? ???????? ???????? (5) ???????????????? ????????????????????????????,????? ???????????? ??, ???? 2010 ? 7 ? 27 ?? 28 ??????? ????????????, ???????????????????????? ????????????????: ? ????: ??????????????????????????? ??? (?????2008?2186 ?) ? ????:?????????? ? ????:??? ? ???:12 ? ? ????:200 ??,????,???? 30 ?? ? ??????:???????????????? ? ????:??????????????????????? ? ????: ?????????????????????, ????? ???????????????;???????????????? ?????,?????????????? ? ????:????:?????????????????????? ??;????????????????;???????????? ??????;????????????????????????? ?????????????,?????? ? ????: ???????????????, ??????????? ?????? 5 ? ????:????????,?????????????? ????????,????????????????????????? ????????????????????????,??????????? ????????,??????????????????????,???? ????? ???? ?????????????????????,???????????? ?????????,???????????????,?????? 1??????????,???????,??????,???????? ?????; 2??????????????,????????????????,?? ?????????????; 3???????????(2012 ????? 200 ????,2013 ????? ??) ????????????????? , ???????????????? ???????? 200 ??????----??, ?????, ?????????, ?????? 1000 ??,??????????????,?????????? ????????; 4??????? PPP ???????????"????????"??? "??"??,?????????????? 6 ??????????????? ????????????????????????1998 ??, ???????????????????(GEF)????????? ?????"??/GEF ????????"????,?????? ???:??????? GEF ???????????????,? ??????????"??????(ESCO/EMC) "?????? ???????????,??????????????????? ??????,????????????????,??????? ??????????,??????????????????? ???????,???????????????,????? ??????????????????????,???????? ????"????????" ,???????????????? ??????,????????????????"???"??? ????,?????????? 2006 ?,?????????????????,??????? ???(?? CHUEE ??)????,????????????? ???(IFC) ????????????????????????? ?????CHUEE ??????????????????????, ??????????????CHUEE ????????????? 1 ?????----???????????????????????? ??,???????????????????????????? ?????? IFC ????????????????????,?? ??????????????????????????????? ???????????????????????????,??? ?????????????? CHUEE ?????,??????????????????? ?????,????????????????????????? ?????????????????"??????" ?2006 ? 5 ?, ???????????????????,???????"??? ?"??,?? CHUEE ???????????;2007 ? 6 ?,?? ??????????????????????;2008 ? 6 ?,?? ??????? CHUEE ????????? IFC ????????? ??,???????????? ????,??????????????????????? ?,?????????(ODA)???????????????? ?????,????????????????????,???? ?????????????????????(????????) ?????????????,????????????????? ???? IFC ???????????,????????????? 2 ???????,??????????,???????????? ??????? 25%,????????????????????? ???????????,??????????????????? ???? ???????????????????????????,? ???????????????????????????2008 ?, ??????????????????,??????????"? ??????" ,????????????? NGO,??????? ????,???"??"???? 2009 ?,?????????? ????,????????????????2009 ?,?? 2008 ? ?(???)????????????????????????? ??????????????????????????????? ???????? 9 ???,???????????????? ???,???????????????????????,? ????????????????,????????----???? ???????;????(VC)?????(PE)??????? ?????,???????????----??????????---- ????????????????????????,?????? ?????????????????----??????????? ????????????? 3 ??,?????????????????????????? ?????,????????????????????,???? ??????,?????????????????? ???????,????????????????????? ?? 1;????????????,?????????????? ??????? 2? ??,??????,??????????????????? ????????????;????????????????? ?,?? ESCO ?????????????????? ?????,????????,?????????????? (???????)??????,?????:??????"?? ?????????"???,????????????????? ?,????????????,???????????????? ?,???????? ?????????????????,??????????? ???,?????????????(???) ,???????? 1 2 ????????????:???????????????????????? ??????????????????,????????????????????????? 10 ?? ????????,????????,????????? 4 ?????,?????????????????????,??? ?????? 5 ?$1m uw@@ if %@m%mwm5Uf'@T'AQQEENKE Qmiy H. w@VmaOww% xmai ,wmmio wmr@@i,ui; > Wm, EE 101> Wm, EE j?E EJ 5% immh i Eikz ( Customer ( / ) (V) AB* BC* AC* A* B* (A) C* Date N ) : KVA* Kvar* 387 / * 389 ( 387 45 . 65 53 , 7 , * 0.88 KW* 34 . * 10KW / * / * / * / * / * / * Remarks ( ) : / * : 6 ( Customer ( / ) (V) AB* BC* AC* A* B* (A) C* Date N ) : KVA* Kvar* * , , KW* ) * / * ( , ( . ), . . , . .. . 5.5KW / * / * / 10kv 400v * / * / * / * 500A / Remarks ( ) : * : 7 QQE EEMMQE E555 5 5 5555 5 ri EE lj lj lj El.. El-. Eln5555 QTUVUVUV E, ff-f .. .. .. U11EH15.5E.5E~-df ~-df my my up 575 55 QQ5 QQ5 zlizli -- QQATTM 5 5 5 5 5 5 3535 f><1Q? QQ 5 55 N555 WF: 55 U) U) EE m555555555555555 3% 53% 5 5 5555 ?5555"555"5555 5 5 5555 5555 5 5 5 5555 55555Qwc5r5c57Q+ T. T.. T.. ., 55535 Q55 5351 C1 Q1 5 5 &EE555g%55g? 5 5 E555 5 535 53 EH EH ETAFIFIFI 5555 L5 5 5555 omg#bb 55A: 5555= Overview Background: What is "market transformation"? Energy Efficiency Market Transformation: Cities and Strategies Meredydd Evans Green cities: some examples of market transformation Market transformation strategies Energy efficiency funds and management Bulk procurement Conclusions 1 2 What is market transformation? Green Cities: Some Examples Strategic interventions that attempt to cause lasting changes in the structure or function of a market or the behavior of market participants, resulting in an increase in the adoption of energy efficient products, services, or practices (American Council for an Energy Efficient Economy, Economy ACEEE) Key elements: address market barriers, opportunities Seek to effect lasting change, building on market trends Woking, UK Whistler, British Columbia, Canada Seattle, WA, USA Other E Oth Examples l Cambridge, MA, USA Los Angeles and San Francisco, CA, USA 3 4 City Examples of an Integrated Approach Woking, UK: innovative deal structure to enable new, clean energy technology Whistler, Canada: a goal-oriented sustainable development approach with many stakeholders Woking, UK Annual savings of ~$2 million, from a $5.6 million investment for energy efficiency fund Lower energy costs than elsewhere in England Financed through a partnership between the town and a Danish ESCO. Innovative technologies integrated in an ESCO-run ESCO run system CHP, heat storage, photovoltaics, wind, fuel cell Do not sell to power grid, so no transmission and distribution charges Partnership company signs private contracts with consumers 5 6 1 Seattle Green Building Capital Initiative Background Green Building Task Force convened July 2008 with two subcommittees - new buildings and existing buildings Each subcommittee came up with policy options which were scored based on energy efficiency potential, economic benefits, and administrative feasibility Seattle Green Building Capital Initiative Overview Subsidized home energy audits Training for auditors and energy-efficiency technicians Energy-saving home improvement loan program Energy disclosure requirement Improving building codes Expedited permit process Recommended options were developed into the Mayor's Green Building Capital Initiative, launched in April 2009 7 8 Other Examples Cambridge, Massachusetts created the Cambridge Energy Alliance in 2007 Goals include reducing electricity demand by 50MW and reducing peak load 15% in five years Services include free or reduced-price energy audits for residents and businesses and consulting on financing options Other Examples San Francisco, California Energy Watch Program offers small businesses and multi-family housing units free energy assessments and reduced cost installation of energy-efficient equipment. 24 x 7 Energy Challenge Contest offers prizes and recognition to commercial buildings who track their energy use through g gy g approved benchmarking methods and achieve significant reductions. Los Angeles, California offers cash rebates for purchasing efficient appliances and trade-in programs for inefficient appliances. 9 10 Some Market Transformation Strategies Energy efficiency funds Bulk procurement Some fund models State funds for energy efficiency (Rate-payer funds invested $3.1 billion in U.S. in 2007) Private equity funds for environmental technologies (ex. Global Environment Fund, Climate Change Capital) Energy Service Companies ( gy p (ESCOs) and Super-ESCOs ) p Bulgarian Energy Efficiency Fund (public investment, private management for loans, guarantees and advice) 11 12 2 Fund issues Professional management vs. policy and political goals Equity investments, loans, grants or some combination Required rate of return vs. acceptable risk Energy efficiency retrofits vs. investment in new technology sales p and production Delivery Methods of Ratepayer-Supported Energy Efficiency States use three structures to deliver ratepayer-funded energy efficiency (EE) services: 1. Size of individual investments Range of technologies: integrated or narrow focus? Accountability and oversight 2. 3. State Agency Program Administrators - State energy office or state public utility commission serves as program administrator. State agencies may deliver EE services themselves or hire contractors for some or all work. Utility Program Administrators - Utilities collect funds from customers pursuant to state law and/or regulation, and in turn spend funds on EE services delivered to customers participating in efficiency programs. Third-Party Program Administrator - Third-party organization serves as a program administrator Source: Matthew Brown, State Energy Efficiency Policies: Options and Lessons Learned, http://ase.org/content/article/detail/5057 13 14 Case of Illinois State transitioning to a new hybrid of utility/agency/thirdparty administrator Energy Efficiency Trust Fund (EETF) Administered by the Illinois Department of Commerce Required by law to spend the fund on residential EE including EE affordable housing and home performance programs with Energy Star Energy Efficiency Fund: Take-Out Financing Illinois Clean Energy Community Trust Grant-making foundation for EE projects Administered by the Illinois Clean Energy Community Fund (third-party administrator) Funding from one-time $250 million payment as part of Commonwealth Edison settlement agreement when merged with PECO Energy Company (Utility) Source: Matthew Brown, State Energy Efficiency Policies: Options and Lessons Learned, http://ase.org/content/article/detail/5057 15 16 Sources: http://www.commerce.wa.gov/summit/EE1.pdf Bulk Procurement Process in Brief Feasibility Study Buyers Group Specifications Competition & Tendering Implementation Evaluation Benefits of Bulk Procurement The Buyers The Government The Suppliers Costs Efficiency 17 18 3 Market Transformation Potential Buyers Organization implies power Bulk Procurement Programs Appliances Covered: Lighting Water heaters Refrigerators Clothes washers Dish washers Ceiling fans Copiers Electric motors Products Price y Quality Variety Design Options: Subsidy or no subsidy Number of suppliers selected Support actions: information campaigns, rating/labeling systems Suppliers Variety Market share of quality suppliers 19 20 Example: US DOE Sub-CFL Procurement 1998-1999 No subsidies Addressed two market barriers: price and size Two products already in the market met specifications Two RFPs i T RFP issues f t for two phases h Multiple awards were given New products entered the market during both phases Winners products advertised through DOE website One year warranty Results: IEA DSM Item Clothes washer and dryer Copier of the Future Industrial Motors 50% 70-75% 20-40% reduction of losses Energy Reduction 21 22 Bulk Procurement Lessons Agreeing on specifications Target a fairly standardized appliance Give multiple awards Conclusions Energy efficiency brings a range of benefits to local communities: jobs, economic growth, industrial competitiveness Integrated approach among stakeholders can lead to great gains in efficiency Market transformation involves more than individual measures. Strategy involving multiple parties. Innovation is a circular process Include multiple procurement phases Organize a strong network among buyers Learn from the procurement process itself Combined with additional market transformation strategies to improve effectiveness Standards Labeling Information Rebates Many new technology options available Key issue is financing to facilitate investment 23 24 4 Outline Some assumptions: Link between the fund and ESCO ESCO model and business planning Some options and issues for the fund to consider Fund management issues Capital sources and strategies Business Planning for ESCOs: Some Thoughts for the Chongqing Energy Efficiency Fund Conclusions Meredydd Evans and Becky Schaaf Meeting with CECIC-Chongqing February 2, 2010 1 ESCO Intro nergy ervices mpanies unlock doors to energy efficiency projects through technical expertise funding ESCOs in China First ESCO in China established in 1995 Energy Management Company Association (EMCA) Founded in 2002 Services include information dissemination, technical assistance and consulting, capacity building, etc. 300 members in 2007 USD 1 billion invested in energy efficiency projects World Bank/Global Environment Facility (WB/GEF) project Three pilot ESCOs Funding for EMCA Guarantee fund 3 4 Business Plan Considerations What do you want to achieve? How do you get there? What objectives do you have to meet? What factors are critical to your success? y What are your strategic markets? Who is your competition? What value do you add? How will you market your services? Target Sectors - Market Segment Commercial Industrial Municipal 5 6 1 Target Sectors - Construction Phase Typical ESCO Services Existing Buildings New Construction Partner with a construction firm Pay for and manage a select number of energy conservations measures beyond what would have been installed to meet existing standards/code Energy savings calculated against a simulated baseline Audit Proposal Financial Assistance Design and Construction Maintenance and Monitoring 7 8 Financing Considerations What is the cost of the money (interest rate/expected rate of return on investment)? How does the funder's timeframe compare to the anticipated project cycle? What is the administrative burden/reporting requirements of accessing the money? Are their other, programmatic requirements associated with accessing the money? Contracts Key Elements: Source of Financing Type of Guarantee Repayment Mechanism Common Models: Shared Savings Guaranteed Savings Other Models: First Out Repay from Savings Chauffage Build Own Operate 9 10 Contract Models - Shared Savings Shared Savings Repayment Mechanism Source: http://www.thaiesco.org/file/file02072009/17-2-Foundation-Tsutsumi.pdf Source: http://www.jase-w.eccj.or.jp/technologies/pdf/factory/F-20.pdf 11 12 2 Contract Models - Guaranteed Savings Marketing Strategies ? Specific Technical Solutions ? Technical Services ? Financing ? Demand Side Management ? Guanxi / Relationship Source: http://www.thaiesco.org/file/file02072009/17-2-Foundation-Tsutsumi.pdf 13 14 Measurement and Verification Basic Model Operations and Maintenance Costs Before Upgrade ? Operations and Maintenance Costs After Upgrade Energy Savings Measurement and Verification, Continued International Performance Measurement and Verification Protocol (IPMVP) Partially measured retrofit isolation Retrofit isolation Whole facility Calibrated simulation Energy savings depend on Cost of energy Time of operation Inventory change Impact of indoor & outdoor environment conditions Centralized v. dedicated project based metering Process/product change http://www.evo-world.org 15 16 Risk Factors Risk Construction: on time, on budget, and per specifications Issues and Options: Financing Assumed by -> ESCO or Contractor Bank Loans Positive: Largest source of ESCO funding, can fund ESCO or individual projects. Negative: Demand collateral, not familiar with ESCO operations Technical design, equipment, and -> ESCO system performance; monitoring and verification E d User Energy end-user load or "baseline" -> End U End-user credit Energy price & price spread -> Lender or ESCO -> End User Private Equity Positive: C offer a l P iti Can ff larger pool of f di th b k l f funding than banks Negative: Lack of interest due to small project size, exit strategy Public Funds Positive: If available, may offer lowest interest rates Negative: Eligibility requirements. Same obstacles as borrowing from banks Project operations and maintenance -> End User cost 17 18 3 Select Private Equity Firms in China China Environmental Fund Aloe Private Equity Global Environment Fund Orchid Asia H&Q Asia Pacific 3i asia pacific Bain Capital Asia Private Energy Market Fund Standard Chartered Bank HSBC Private Equity Asia Issues and options: Financing, continued Selection of investment sources strategically linked to business model (risk/return requirements, exit strategy, etc.) gy p Some exit strategy options Private sale of stake in company Initial public offering Bonds 19 Energy Efficiency Fund: Take-Out Financing Options and Issues: Fund Management Tension between goals of private and public capital How will the public and private arms of the fund interact? Transparency Benefits of professional management to maximize achievement of business goals Acceptable levels of risk and return Efficiency investments have lower risk and lower return than investments in new technology development Can a successful ESCO business model create greater value, return and growth than the sum of its individual project returns? Sources: http://www.commerce.wa.gov/summit/EE1.pdf Responsible Management Funding Sources Goals Fund Management Example: World Bank Example Public Policy Private Profit Source: http://www.esmap.org/filez/pubs/PrivateSecParticipverNov2003.pdf 23 24 4 U.S.-China Clean Energy Research Center Launch planned for this year Government resources, but also aim to attract private financing Goal of developing, commercializing and deployment new gy g g clean energy technologies ( (buildings, vehicles, clean coal) May provide unique opportunities to gain market insights and work on high value-added technology development Ex. Cool roof materials; adaptive building materials Conclusions Energy Efficiency projects support private and public aims Providing a combination of financial and technological services overcomes barriers to energy efficiency projects and leads the way for larger-scale commercial financing 26 5 Overview Energy Efficiency Market Market characteristics Barriers Energy Efficiency Investment: Market, Financing and Risk Management Sha Yu Beijing, July 27 2010 Select Project International best practices Business models Examples of technologies Guarantee Investment Returns Risk management Measurement and verification Conclusions 1 2 Energy Efficiency Market Large numbers of small, dispersed projects Diverse market segments with many financing instruments High return and low risk Wrong perception Energy Efficiency Investments: A Low Risk, High Return Source: ACEEE estimates adapted from U.S. EPA and the Vanguard Group 3 4 Cost of Building Green Barriers to Energy Efficiency Financing Split incentives High transaction costs Uncertain savings potential High upfront costs Lack f information & capital L k of i f ti it l Limited reach and investment Source: 2007 opinion survey by World Business Council for Sustainable Development 5 6 1 Mechanism to Overcome Barriers Aggregation Energy audits Measurement and verification A business plan or bankable project proposal U.S. Energy Efficiency Funds 30 States have energy efficiency programs Total energy DSM/EE spending >$2.2 billion (2006) Source: http://www.adb.org/documents/events/2009/CCEWeek/Presentation-Dilip-Limaye-Funds.pdf 7 8 International Energy Efficiency Funds New South Wales - Sustainable Energy Fund New Zealand - Sustainable Management Fund Thailand Energy Conservation Fund (ENCON) Romania Energy Efficiency Fund (FREE) Czech R C h Republic E bli Energy S i Savings F d Fund IFC - Hungarian EE Fund and CEEF Fund Brazil - Energy Efficiency Tariff Charge Sri Lanka - Energy Conservation Fund Korea - Korea Energy Management Fund Lessons Learned from International Fund Management Technically feasible Cost-effective Financially sound Environmentally and socially beneficial Acceptable l A t bl level of risk l f i k Replicable Contributes to developing energy efficiency markets Properly prepared and documented 9 10 Project Financing Mechanisms Grants Loans Insurances Equity funds Loan guarantees L t Credit guarantees Supplier credits Carbon finance Business Models Financing option Small business yes yes yes Residential Commercial Public and Institutional Green mortgage Green leasing On bill On-bill financing Efficiency services agreement Managed energy services agreement Energy saving performance contracting/ESCOs yes yes yes yes yes yes yes yes yes yes yes yes 11 12 2 Examples of Energy Efficiency Opportunities Risks for Energy Efficiency Projects External Drivers Demand & Cost Drivers Available Technologies Available Risk Transfer Instruments & Infrastructure/Support Other Outcomes (carbonrelated, labor-related, image) Regulatory & Market Drivers/Risks Financial Outcomes (cost, CDM credits, project NPV) Internal Company Drivers Importance of energy to the company's profit Internal capabilities of the company to implement EE Projects Source: World Bank Group 2007. Catalyzing Private Investment for a Low-Carbon Economy. Source: Kleindorfer 2010. Risk Management for Energy Efficiency Projects in Developing Countries. 13 14 Manage Risks Maximize the transparency of procedures Marketing and training Use existing market players Spread the risk through many projects Aggregate projects A t j t An experienced and expertise management team Work closely with the management of portfolio companies Creative exit strategies Monitor, measure and verify energy and financial outcomes Measurement and Verification (M&V) M&V is the process of using measurement to reliably determine actual savings created within an individual facility by an energy management, energy conservation or energy efficiency project p g or program. As savings cannot be directly measured, the savings can be determined by comparing measured use before and after implementation of a project, making appropriate adjustments for changes in conditions. 15 16 M&V Purpose Increase certainty, reliability, and level of savings Reduce transaction costs Reduce financing costs Reduce uncertainties to reasonable levels Allocate risks to th appropriate parties All t i k t the i t ti Provide a basis for demonstrating emission reduction and delivering enhanced environmental quality Provide a basis for negotiating the contractual terms to ensure that an energy efficiency project achieves for exceeds its goals of saving money and improving energy efficiency Allocate Risks Interest rates Construction costs M&V confidence Energy related cost savings Delays Major changes in facility Operating hours Load Weather User participation Equipment performance Operations Preventive maintenance Equipment repair and replacement Financial Operational Performance 17 18 3 M&V Guidelines Description Provide procedures for quantifying the savings resulting from the installation of energy conservation measures. Compatible and consistent with IPMVP. Developed a revised guideline with specific guidance on renewable energy projects. International Performance Measurement and Quantify the energy savings performance of energy conservation measures. Verification Protocol (IPMVP) Have three volumes on concepts, options and application of M&V on water and efficiency projects. ASHRAE Guideline 14-2002 A reference for calculating energy and demand savings associated performance contracts. Instrumentation and data management guidelines and methods for accounting for uncertainty associated with models and measurements. Doesn t accounting for uncertainty associated with models and measurements Doesn't discuss other issues. Doesn't address water efficiency projects. California Utility SPC Program the New York State Energy Research and Development Authority (NYSERDA) American Electric Power Commercial & Industrial Standard Offer Entergy's Large Commercial Standard Offer Program (Com SOP) Oncor Electric Delivery Center Point Energy These state incentive programs has guidelines specifying their individual requirements for the measurement and verification of energy savings. Commercial and Industrial Standard Offer M&V requirements adhere to the standards of IPMVP and have three approaches for use: deemed savings, simple and full M&V. These requirements cover both retrofits and now projects. Name/Group Federal Energy Management Program's (FEMP's) M&V Guidelines Savings Measurement Savings = (Baseline Energy - Post Installation Energy ) ? Adjustments Source: DOE 2008. M&V Guidelines: Measurement and Verification for Federal Energy Projects Version 3.0. 19 20 M&V Plan Generic Procedures Allocate project responsibilities Define baseline. Define energy efficient design and projected savings. Define general M&V approach. Prepare project-specific M&V plan P j t ifi l Verify installation and commissioning of ECMs or energy efficient strategies. Determine savings under actual post-installation conditions. Re-evaluate at appropriate intervals. Source: DOE 2008. M&V Guidelines: Measurement and Verification for Federal Energy Projects Version 3.0. 21 22 M&V Guidelines FEMP M&V Guidelines: Draft Renewable Energy Guide: https://docs.google.com/a/lbl.gov/fileview?id=0BxnINl7dLG_eZDJiZDU1ZTktYTRmNC00N DcyLWJmM2QtNWI4NDE4OTkxZmUx&hl=enn International Performance Measurement and Verification http://www.evo-world.org/ Protocol (IPMVP) FEMP M&V Guidelines: Draft Renewable Energy Guide ASHRAE Guideline 14-2002 http://resourcecenter.ashrae.org/store/ashrae/newstore.cgi?itemid=9012&view=item http://repository.tamu.edu/bitstream/handle/1969.1/5147/ESL-IC-05-10- 50.pdf?sequence=4 http://www.sce.com/NR/rdonlyres/30 3373C F44C 49C 9 A http://www.sce.com/NR/rdonlyres/3023373C-F44C-49CB-9DAE- F651826B6AE4/0/090601_SCE_G_Measurement_And_Verification.pdf http://www.nyserda.org/Funding/1101MVplan.doc Name/Group Federal Energy Management Program's (FEMP's) M&V Guidelines Links http://www1.eere.energy.gov/femp/pdfs/mv_guidelines.pdf Resources Alliance to Save Energy American Council for an Energy-Efficient Economy Energy Star Energy Efficiency & Renewable Energy Federal Energy Management Program Sustainable Energy Finance Initiative California CEF www.ase.org www.aceee.org www.energystar.gov www.eere.doe.gov http://www1.eere.energy.gov/femp/ http://sefi.unep.org/english/home.html www.calcef.org California Utility SPC Program California Utility SPC Program New York State Energy Research and Development Authority (NYSERDA) American Electric Power Commercial & Industrial Standard http://www.aepefficiency.com/arkansas/CI/downloads/ Offer M&V requirements Entergy's Large Commercial Standard Offer Program (Com http://www.entergy-texas.com/energy_efficiency/ci_mv.aspx SOP) Oncor Electric Delivery http://oncorgroup.com/pdf/programs/candi/Section_III.pdf Center Point Energy http://www.centerpointenergy.com/services/electricity/business/energyefficiencyprogra ms/commercialandindustrialstandardoffer/98aa6954e3853210VgnVCM10000026a10d0a RCRD/ 23 24 4 Conclusions Need to customize the EE fund to match the program portfolio, target customers and their characteristics, financial markets, maturity of energy service providers, etc. Energy efficiency projects create economic, social and environmental benefits. en ironmental benefits Providing financial and technical services in an innovative way overcome barriers to energy efficiency projects and increase scale of projects. Measurement and verification is effective to mitigate risks and guarantee returns. 25 5