- Buildings Guide
- Policy Guide
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The policy set contains industry development guidance, financial incentives, and a technical guideline to promote energy performance contracting in the industry, building, and transport sectors in China. The industry development guidance specifies the development target of the energy service sector in China and proposes supportive policies and measures. The financial incentives (including grants and tax incentives) reward energy saving achievement to qualified energy service companies. The technical guideline specifies technical requirements and provides a standard contract sample.
During 11th Five-Year period (2000-2005), the Energy Performance Contracting (EPC) business grew rapidly. However, its development also encountered several barriers. Among others, a lack of incentive policies and standardization, and financing difficulties faced by energy service companies (ESCOs) are the major barriers., These are partly addressed by this policy set. Policy 1 provides a general guidance to local authorities to promote EPC development, in terms of the development targets of the sector and supportive policies and measures, such as financial incentives, easing the ESCOs’ access to finance, accounting management, training, demonstration, etc. It thus reduces the local authorities’ uncertainty about the support to energy service industry.
Policy 2 provides grants to qualified ESCOs: for building energy efficiency projects, the energy saving should reach 100-10000 tce/year. Subsidies are provided by the central and provincial governments together, in which the central government and provincial government provides 240 Yuan/tce and no less than 60 Yuan/tce, respectively. The ESCOs can apply for the subsidy when a project is completed. Provincial department in charge of energy efficiency and financial department then evaluate the project and verify the energy saving. The central and provincial subsidy will be awarded to ESCOs according to the verified saving.
Policy 3 defines the key terms, clarifies technical procedures (monitoring and verification), and provides standardised models and contracts, which address the uncertainties consumers have about the energy service provision and lower the transaction costs. It is based on a series of existing standards, for example, energy use diagnosis standards. In ‘Notice of further promoting energy conservation work of public buildings’ (Policy 7 in policy set 2), Ministry of Housing and Urban and Rural Development (MOHURD) and Ministry of Finance (MOF) jointly support EPC development in the building sector, especially the retrofitting of existing buildings.
Policy 4 provides tax incentives to qualified ESCOs: it specifies the preconditions for ESCOs to exempt from VAT and turnover tax as well as reduce enterprise income tax.
In 2011, the number of companies with EPC-based energy efficiency projects increased by 88.23% compared to that in 2010. The gross industrial output value (125.026 billion Yuan) of the whole energy saving service industry for the first time exceeded 100 billion Yuan. These figures show a significant acceleration compared to the development in the previous years, which is likely due to this policy set.
According to the “12th Five-Year plan” issued by the state council, EPC promotion is one of the 10 Key Energy saving Projects. The plan stated that, by the end of 2015, a comprehensive energy conservation service system must be built and the number of energy service companies increased to 2000. It also aims at a gross industrial output value of 300 billion Yuan for energy saving service industry in 2015. The target is to achieve energy savings of 60 million tce by EPC during the period 2011-2015.
|Policy 1||Proposals on Accelerating the Implementation of Energy Performance Contracting on the Promotion of Energy Service Industry||国务院办公厅转发发展改革委等部门关于加快推行合同能源管理促进节能服务产业发展意见的通知|
|Policy 2||Notice on Issuance of ‘Interim Measures of Management of Financial Subsidy for Energy Performance Contracting’ by by the Ministry of Finance (MOF) and National Development and Reform Commission (NDRC)||财政部 国家发展改革委关于印发《合同能源管理项目财政奖励资金管理暂行办法》的通知|
|Policy 3||General Technical Rules for Energy Performance Contracting (GB/T 24915-2010)||合同能源管理技术通则|
|Policy 4||Notice on Issuance of “to develop solutions for the issues of value-added tax, turnover tax and enterprise income tax in the energy service industry” by the Ministry of Finance (MOF) and State Administration of Taxation (SAT) (2010).||关于促进节能服务产业发展增值税营业税和企业所得税政策问题|
The ESCO industry has developed rapidly in the last decades. The total number of ESCOs reached 2339 in 2012(GBPN, 2013). During the 11th Five-Year period, the cumulative investment in Energy Performance Contracting (EPC) projects reached 68.395 billion Yuan, and resulted in energy savings of 22.43 million tce per year, and CO2 reduction 61.067 million tonnes per year. The industry sector takes up 71.7% of the total investment, for instance, metallurgy production, building material industry, and power industry etc. The building sector and transportation are 26.3% and 1.8% respectively. Based on an inspection for about 100 ESCOs, building energy saving service projects account for 58% of the total projects. However, the output values of building energy efficiency projects are less than 1/4 if the total output values of the ESCO industry (GBPN, 2013).In contrast, the potential market for EPC in the building sector is extremely huge due to the large demand of retrofitting existing buildings.
The dominant EPC model in China is shared saving contract. The shared model requires high upfront cost to be born by ESCOs. Most ESCOs in China are SMEs with relatively low financial capital and revenues, which has difficult to bear such a high costs. Meanwhile, financial institutions in China are generally unwilling to provide them finance.
The building owners lack motivation to implement EPC due to the low energy prices, unclear benefits, floor-area-based heating bills etc.
The overall aim of the policy set is to increase the use of EPC. EPC, in turn, usually optimises larger energy-using systems through investment in retrofits and through energy management.
Policy 1 and other local supportive policies have been regarded as the milestones for EPC development in the last 12 years, because EPC was first promoted by the central government in China.
Policy 1 aims (1) to foster a number of specialized energy service companies and establish a regulated energy service market by 2012 and; (2) to establish a comprehensive energy service system so that EPC will be one of the main approaches for energy retrofitting projects.
It is a national policy.
The technological focus of this policy set includes both buildings and appliance technologies. However, it does not focus on particular technologies.
It targets various technical actions as well as energy management.
The following pre-conditions are necessary:
Agencies or other actors responsible for implementation
The local governments as well as Ministry of Housing and Urban and Rural Development (MOHURD) and their line offices at local level.
Financial incentives (including grants and tax incentives) are provided to EPC projects, based on the actual saving amount. The funding comes from the central and provincial governments’ budgets.
According to the Energy Conservation Service Industry Committee of China Energy Conservation Association (EMCA), during the 12th Five-Year period (2011-2015): 1) the number of ESCOs is expected to increase from 782 to 2500; 2) gross turnover will reach 300 billion Yuan; 3) EPC investment is to be more than 150 billion Yuan; 4)planned energy savings are planned at 40 million tce.
Actors responsible for implementation
The local governments as well as Ministry of Housing and Urban and Rural Development (MOHURD) and their line offices at a local level.
EPC projects are included in the annual inspection list by MOHURD.
In February every year, provincial financial departments should submit approved EPC projects and financial reports to the Ministry of Finance (MOF), who together with National Development and Reform Commission (NDRC) organize an inspection for the implementation and energy performance of subsidised projects at local level.
Evaluation of the energy service industry development is conducted by organizations such as Energy Conservation Service Industry Committee of China Energy Conservation Association (EMCA).
Based on the submitted reports and the inspection results, MOF and NDRC will make the plan for next year.
Concrete figures in energy savings/year
Achieved energy savings data is only available for the 11th Five-Year (2006-2010) period: the energy savings were 22.43 million tce per year, and CO2 reduction 61.067 million tonnes per year.
For the buildings of energy efficiency projects, the energy saving should reach 100-10000 tce/year. Subsidies are provided by the central and provincial governments together, in which the central government and provincial government provides 240 Yuan/tce and no less than 60 Yuan/tce, respectively. Some local governments provide higher subsidy than that which is specified by the national standard, for example, Shanghai and Beijing provide financial support with 600 Yuan/tce and 500 Yuan/tce, respectively.
The cumulative investment in EPC projects during the 11th Five-Year (2006-2010) period reached 68.395 billion RMB.
According to the ESCO committee - the China Energy Conservation Association (EMCA), up to 3900 companies had been registered in energy saving service sector by the end of 2011. 1472 companies have had Energy Performance Contracting (EPC) projects, increasing by 88.23% compared to that in 2010. The gross output value of the energy saving service industry was 125.026 billion Yuan in 2011 exceeding 100 billion Yuan for the first time.
Policy 1: www.bigee.net/s/zc84j1
Policy 2: www.bigee.net/s/ai4mf2
Policy 3: www.bigee.net/s/di37bk