PowerPoint-Pr

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Tracking energy efficiency finance Implications
for energy conservation governance
Yuqing Ariel Yu Task Manager, Climate and Energy
Group Institute for Global Environmental
Strategies (IGES)
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Research questions

• What was the landscape of energy efficiency (EE)
  finance during the 11th FYP (2006-2010)?
• What was the mechanism that facilitated
  mobilization and deployment of EE finance?
• What is the finance need during the 12th FYP?

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Outline

• Part I Background
• Introduction
• Methodology
• Part II EE finance during the 11th FYP
• Overview of EE finance during the 11th FYP
• Enabling environments The target-responsibility
  system (TRS)
• Tracking EE finance
• Part III Outlook for the 12th FYP
• Finance need during the 12th FYP
• Lessons learned

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Chinas energy intensity and energy conservation
targets
No target
Source China Energy Statistics Yearbooks

• China experienced an average annual reduction of
  5 in energy intensity during 1980 to 2002. China
  had an energy conservation target for each FYP.
• The period of 2002 to 2005 saw a reversal of this
  trend energy intensity increased an average 5
  per year. This period was the only period that
  lacked an energy conservation target.
• In response, during the 11th FYP (2006-2010)
  China set a target of reducing energy intensity
  by 20 by 2010 compared to the 2005 level.

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Drivers for X-shaped energy related CO2 emissions
CO2 emissionsa counterbalance
and
emissions (left)
intensity (right)
Source Annual review of low-carbon development
in China, CPI at Tsinghua, 2012
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Definition of EE finance

• There lacks an agreed definition of EE finance in
  the UNFCCC and academia
• Focus on existing facilities and buildings.
• Improvement in end-use and sectoral energy
  performance (i.e., industry, buildings,
  transport, appliances) that include equipment
  upgrades and process improvement
• Power generation efficiency improvement
  (excluding fuel switching)
• Energy conservation related RD and capacity
  building
• When possible, only the additional amount needed
  for EE improvement when impossible to separate,
  the full capital cost of an EE project investment
  

Sector Included in our paper Excluded from our paper
Industry EE standard projects restructuring projects phasing out outdated production capacities EE-related infrastructure construction EE equipment manufacturing enterprises spending on phasing out outdated production capacities
Building Retrofitting residential and public buildings Integrating renewable energy into buildings green buildings
Transport Demonstration of new energy vehicles Low-carbon Transportation Campaign Carried out by 1000 Enterprises in the Field of Vehicle, Vessel, Road and Port
Consumption Subsidizing EE lighting, appliances, and vehicles Trading in old appliances and vehicles Consumers capital government procurement
Capacity building EE technology RD institutional development --
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Overview of EE finance during the 11th FYP
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The landscape of Chinas EE finance
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China invested USD 114.2 billion during the 11th
FYP
Category Source Source Finance (USD billion) Share in EE investment ()
Government budgets The central government The central government 14.5 12.7
Government budgets Provincial and lower-level governments Provincial and lower-level governments 7.3 6.4
Government budgets Subtotal Subtotal 21.8 19.1
Non-government agents Corporate own capital Industrial enterprises 48.7 42.6
Non-government agents Corporate own capital ESCOs 1.3 1.1
Non-government agents Corporate own capital Auto makers 0.9 0.8
Non-government agents Corporate own capital Subtotal 50.9 44.6
Non-government agents Building owners Building owners 1.8 1.6
Non-government agents Banks Banks 36.1 31.6
Non-government agents Stock market Stock market 1.5 1.3
Non-government agents Subtotal Subtotal 90.3 79.1
International funding International institutes International institutes 1.3 1.1
International funding CDM CDM 0.9 0.8
International funding Subtotal Subtotal 2.1 1.8
Total Total Total 114.2 100
Source Annual review of low-carbon development
in China, CPI at Tsinghua, 2013. Note RMB USD
of 7.21 has bee used for the period of the 11th
FYP.

• Chinas annual investment was approximately 2
  times of the aggregate amount of the rest BRICS
  (IEA, 2012).
• 98 of funding for EE came from domestic sources.
  International institutes played a very small
  role.
• The contribution from the central government
  accounted for 12.7 of total investment while
  local governments contributed another 6.4.
  Collectively, various levels of government
  contributed 19.1.
• 79 of funding came from non-government agents,
  such as enterprises, building owners, and banks.
• More than 40 of funding came from industrial
  enterprises, many of which are state-owned
  enterprises.

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The industry sector attracted the largest share
Sector Energy conservation NAMAs Investment (USD billion) Share in the total investment ()
Industry Technological upgrades (Ten Key Project Program, Top 1000 Enterprises) 94.0 82.3
Industry Phasing-out obsolete production capacities 4.2 3.7
Industry Energy performance contracting 3.5 3.1
Industry Subtotal 101.7 89
Building Retrofitting existing residential buildings in the Northern region 3.4 3.0
Building Setting up energy monitoring systems in government and public buildings 0.6 0.5
Building Energy performance contracting 0.9 0.8
Building Subtotal 4.9 4.3
Transport Demonstration of new fuel vehicles 1.2 1.0
Consumption EE lighting 0.2 0.2
Consumption EE air conditioning 1.6 1.4
Consumption EE vehicles 0.4 0.4
Consumption Old appliance trade-in 1.1 1.0
Consumption Old vehicle trade-in 0.5 0.4
Consumption Subtotal 3.9 3.4
Capacity building EE technology RD 1.4 1.2
Capacity building Establishment of energy management centers at the local level 1.2 1.1
Capacity building Subtotal 2.6 2.3
Total Total 114.2 100
Source Annual review of low-carbon development
in China, CPI at Tsinghua, 2013
Note An average RMBUSD rate of 7.21 has been
used for the period of 2006 to 2010.

• Almost 90 of funding went to the industry
  sector, which is Chinas most important sector.
• By contrast, the transport sector had limited
  scope for EE investment.

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EE NAMAs achieved total energy savings of 408 Mtce
Sector Energy conservation NAMAs Energy savings (Mtce) Share in total energy savings ()
Industry Technological upgrades 274 67.1
Industry Phase-out obsolete production capacities 110 26.9
Industry Energy performance contracting 10.5 2.6
Industry Subtotal 394 96.5
Building Retrofitting existing residential buildings in Northern regions 1.95 0.5
Building Setting up energy monitoring systems in government and public buildings 1.16 0.3
Building Energy performance contracting 2.5 0.6
Building Subtotal 5.61 1.4
Transport Demonstration of new fuel vehicles 0.02 0.0
Consumption EE lighting 4.08 1.0
Consumption EE air conditioning 3.26 0.8
Consumption EE vehicles 0.4 0.1
Consumption Old appliance trade-in 0.35 0.1
Consumption Old vehicle trade-in 0.1 0
Consumption Subtotal 8.19 2.0
Capacity building EE technology RD 0 0
Capacity building Setting up energy management centers at the local level 0 0
Capacity building Subtotal 0 0
Total Total 408.3 100
Source Annual review of low-carbon development
in China, CPI at Tsinghua, 2012

• Improving energy efficiency accounted for 64 of
  energy savings realized to fulfill the energy
  intensity target.
• The industry sector realized the largest amount
  of energy savings.
• The vast amount of funding went to the sector
  that had the greatest potential to save energy.

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Data sources and quality

• Data sources
• Official data
• Publicly available data
• Our estimations based on case studies and
  interviews
• Data quality (finance and outcomes of NAMAs)
• At the central level data quality is acceptable
• MOF has specified the central governments
  contribution to energy conservation in its annual
  fiscal statement since 2008
• NDRC has published annual progress reports on its
  climate and mitigation actions with assessment of
  outcomes since 2008.
• At the provincial level data are not consistent
• Too many data sources conflicting information
• At the county/town level rare data sources (case
  studies)
• At the enterprise level rare publicly available
  data (interviews)
• At the bank level No EE specific data (our
  estimation, interviews)

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Energy conservation governance The
target-responsibility system (TRS)
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Improved energy conservation governance mobilized
EE finance
The National Development and Reform Commission
 
Central institutions building energy
??????
??????
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Tracking finance The national EE special fund
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Overview of the national EE special fund
Note An average RMBUSD ratio of 7.21 has been
used for the period of 2006 to 2010.
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Project selection criteria
The 11th FYP The 12th FYP
Way of rewarding Results-based No cap on the scale of rewarding Same
Eligibility Meet the criteria of Ten Key Projects (categories 1 to 6) Minimum achievement of energy savings of 10,000 tce. No requirements on technology Minimum achievement of energy savings of 5,000 tce.
Standard Eastern regions 200 rmb/tce Western regions 250 rmb/tce Eastern regions 240 rmb/tce Western regions 300 rmb/tce
Ten Key Projects are (1) boiler (kiln)
renovation project of the coal-fired industry,
(2) district heat and power cogeneration project,
(3) waste heat and pressure utilization project,
(4) oil conservation and alternative project, (5)
electric motor energy conservation project, (6)
energy system optimization project, (7) building
energy conservation project, (8) green lighting
project, governmental agency energy conservation
project, (9) energy conservation monitoring and
(10) technical service system project.
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The results framework Results verification
before project implementation and upon project
completion
Before implementation baseline energy consumption
Provincial government
Upon completion actual energy savings
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Outlook for the 12th FYP
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China needs USD 202.6 billion to achieve energy
intensity targets in the 12th FYP
Energy conservation NAMAs can achieve energy
savings of 383 Mtce, accounting for 57.1 of
total energy savings required to attain the
national energy intensity target of 16.
Sector Energy conservation NAMAs Energy savings potential (Mtce) Cost (USD/tce) Finance need (USD billion)
Industry   Technological upgrades 171 640.2 109.6
Industry   Phasing-out obsolete production capacities 66.4 -- 4.9
Industry   Subtotal 238 482.0 114.5
 Building Retrofitting existing residential buildings 600 1765.1 10.6
Transport Low-carbon transportation campaign carried out by 1000 enterprises in the field of vehicle, vessel, road and port 100 4194.6 4.2
Energy-efficient products benefaction program Energy-efficient products benefaction program 30.5 585.2 17.9
Energy performance contracting program Energy performance contracting program 60 476.7 28.6
Energy conservation technology demonstration program Energy conservation technology demonstration program 15 1693.9 25.4
Capacity building Capacity building -- -- 1.4
Total Total 383 529.5 202.6
Source Annual review of low-carbon development
in China, CPI at Tsinghua, 2012
Note A RMBUSD rate of 6.11 (as of May 30th,
2013) has been used for the period of the 12th
FYP.
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China has to overcome a finance gap of USD 88.4
billion
Every sector needs to scale up EE investment.
Unit USD billion
Sector Energy conservation NAMAs Finance need in the 12th FYP Investment in the 11th FYP Finance gap
Industry Technological upgrades 109.6 94 15.6
Industry Phasing-out obsolete production capacities 4.9 4.2 0.7
Industry Subtotal 114.5 98.2 16.3
Building Retrofitting existing residential buildings in the Northern region 8.9 3.4 5.5
Building Retrofitting existing government buildings and public buildings 1.7 0.6 1.1
Building Subtotal 10.6 4.0 6.6
Transport Low-carbon transportation campaign carried out by 1000 enterprises in the field of vehicle, vessel, road and port 4.2 1.2 3.0
Energy-efficient products benefaction program Energy-efficient products benefaction program 17.9 3.9 14.0
Energy performance contracting program Energy performance contracting program 28.6 4.4 24.2
Energy conservation technology demonstration program Energy conservation technology demonstration program 25.4 1.4 24.0
Capacity building Capacity building 14.4 12.2 2.2
Total Total 202.6 114.2 88.4
Source Annual review of low-carbon development
in China, CPI at Tsinghua, 2012
Note An average RMBUSD rate of 7.21 has been
used for the period of the 11th FYP a RMBUSD
rate of 6.11 (as of May 30th, 2013) has been
used for the period of the 12th FYP.
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Lessons learned

• Improved energy conservation governance mobilized
  EE investment at all levels.
• Institutional arrangement is critical for EE
  finance.
• More funds should be allocated to support
  capacity building at the sub-national level.
• The TRS is incompetent in inducing local
  governments internal drivers for energy
  conservation.
• To overcome the finance gap, China needs to
  mobilize banks.

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Thank You Contact yu_at_iges.or.jp