WELCOME TO THE EU SME CENTRE WEBINAR SERIES. A project funded by the European Union

Transcription

1 WELCOME TO THE EU SME CENTRE WEBINAR SERIES A project funded by the European Union

2 The Energy Efficiency Market and Energy Service Companies in China Karl Upston-Hooper, 8 May A project funded by the European Union

3 The EU SME Centre The EU SME Centre in Beijing is a project funded by the European Union To assist European SMEs to export to China and establish, develop and maintain commercial activities in the Chinese market Free, confidential information and advice, and practical support services 3

4 Services Information and advice BD Support services Enquiries Publications Training Webinars Databases Legal HR & Training S&C Hot desks Briefings Matchmaking and networking

5 Please submit your text questions and comments using the Questions Panel

6 Speaker Biography Karl Upston-Hooper, General Counsel GreenStream Network plc Karl Upston-Hooper is the General Counsel of GreenStream Network plc, a position he has held since GreenStream is a leading Nordic company focused on energy efficiency and climate opportunities in China. As General Counsel, Karl has lead the design and implementation of GreenStream s ESCO business in China, is a director of GreenStream s China subsidiaries, manages the operation of GreenStream s proprietary carbon funds and acted as advisor to various Scandinavian governments and international financial institutions. Karl holds an LLB and LLM (Hons) from Victoria University of Wellington and an LLM (summa cum laude) from Katholieke Universitiet Leuven and is currently completing his Doctorate of Law at the University of Eastern Finland. He is a Board member of the International Emissions Trading Association, Associate Editor of the Carbon and Climate Law Review, Chairman of the Business Partnership for Market Readiness (an initiative in co-operation with the World Bank) and teaches Climate Law at the University of Eastern Finland

7 Agenda Energy Efficiency and the 12th Five-Year Plan What is EPC & ESCO? The evolution of ESCOs in China GreenStream s Experience in China Business Model Challenges Lessons Learned The EFFI Programme: An Example of How to Support Green Tech SME s Growth in China

8 Chapter 1 Why Energy Efficiency?

9 China s Energy Problem China s energy intensity (per unit of GDP) is 4.32 times that of the EU 5/15/201430/11/10

10 China s Energy Solutions 11 th Five-Year Plan set a target of cutting energy consumption per unit of GDP by 20% Top-1000 Enterprises programme launch in th Five-Year Plan requires: 16% reduction in energy consumption per unit of GDP 17% reduction in GHG emission per unit of GDP For example: 5% reduction in energy consumption per ton of steel For example: 22% reduction in energy consumption per ton of paper Pilot GHG emission trading schemes Massive investment in renewables and nuclear In January 2014 U.S. Embassy in Beijing registered a PM2.5 level of 671, about 26 times higher than the level considered safe by the World Health Organization

11 Poll 1 How active are you in the Chinese energy efficiency sector? a. Established player b. New entrant c. Thinking about dipping the toes

12 Chapter 2 What is an ESCO?

13 What is EPC & ESCO? Energy Performance Contracting means an energy conservation service mechanism whereby an energy service company and energy user entity contractually agree on the energy savings target of the energy conservation project, the energy service company provides the necessary services for the realisation of the energy savings target, and the energy user entity pays for the energy service company s investment and reasonable profit from the energy savings results National Standard GB/T An energy service company ( ESCO ) is one that undertakes energy performance contracting ( EPC ) with energy users The structure of the EPC may vary: Shared Savings Contracts: ESCO finances the investment in return for an agreed share of the value of energy savings for an agreed period, after which the asset ownership is transferred to the energy user. May, with larger projects, involve MRV of actual savings. Guaranteed Energy Savings Contracts: Energy user finances (and owns the asset) with ESCO providing design/implementation services and a performance guarantee. Penalties against the ESCO will be included if minimum performance levels not reached. Outsourcing Contracts: Long-term provision by the ESCO of key energy outcomes (power, steam, heat etc) resulting in operating cost savings for the energy user. Industrial sector are the predominant consumer of energy efficiency services, and unlike Europe and the US, public sector entities have yet to embrace the EPC model 5/15/201430/11/10

14 Shared Savings in a Nutshell Maintenance Costs Energy Costs Energy Savings Maintenance Costs Energy Costs X% to ESCO Y% to User for agreed number of years with or without MRV with or without subsidies 5/15/201430/11/10

15 Chapter 3 The Evolution of ESCOs in China

16 History of ESCO in China The China Energy Conservation Project established by the World Bank in 1998 to fund three pilot ESCOs (Beijing, Shandong & Liaoning) and establish the Energy Management Company Association ( EMCA ) of China Evolved into $558m CHUEE programme of the IFC designed to support local financing of EPC projects EMCA, with over 500 members, is now an active knowledge hub for ESCO in China 5/15/201430/11/10

17 Growth of EPC in China 4500 Total Energy Performance Contracting Investment in China, (USD Millions) Total Energy Performance Contracting Investment in China, Source: EMCA, 2010 China ESCO Industry Summit meeting proceedings 5/15/201430/11/10

18 EMCs in China EMC market in China is large and a number of companies are active there Over 2300 companies registered as ESCOs in China but technology transfer, financing and project management is unique Top-4 EMCs contributed 40% of energy saving realised by Top-100 EMCs Top-10 EMCs: 56% Top-20 EMCs: 71% Top-100 EMCs: 100% 5/15/201430/11/10

19 Top 20 ESCO Companies CECEP Technology and Investment 中节能科技投资 Schneider-Electric China 施耐德电气 ( 中国 ) 有限公司 Beijing SNTA 北京思能达节能电气股份有限公司 SuZhou Best Area Power 苏州太谷电力有限公司 Zhejiang EcoWell 浙江科维节能技术有限公司 SET Institute, China Petro 中国石油集团安全环保技术 CECEP Industrial Energy Consveration 中节能工业节 Ordos City Sustainability 内蒙古鄂尔多斯循环经济研发 Eastern GreenSource 东方绿源节能环保工程有限公司 RanHe Energy Conservation 赤峰和然节能技术服务有 Beijing KINEETA 北京仟亿达科技有限公司 Siemens China 西门子工厂自动化工程有限公司 YunMai 云南云迈新能源开发有限公司 ZhongJi Energy 上海中际能源科技有限公司 SuZhou JiNeng Elctro 苏州吉能电子科技有限公司 Jiangxi Huadian 江西华电电力有限责任公司 Gansu Minghai 甘肃铭海节能技术有限公司 ZhongYiNeng thermal 包头市中益能供热技术有限公司 HaiSheng Artificial Environment 沈阳海盛人工环境有 Beijing HerropSys 北京和隆优化控制技术有限公司 81,935 81,536 77,200 77,000 72,627 59,800 58,115 50,046 48,439 45,687 42,000 42,000 38,529 38,138 37,500 36, , , , ,089 5/15/201430/11/10

20 Current State of Play Public bodies shall fully recognize the importance of promoting energy performance contracting and developing ESCOs, take effective measures, and actively create a favourable policy environment for accelerating the development of the ESCO industry. State Council of China, 2 April 2010 Government prioritizing EMC by providing financial support, ensuring the government and municipalities lead by example, targeted policy support and development of contractual standards and norms (transparency, low transaction costs) Full tax relief for EMC projects during three first years, and 50% relief for subsequent three years, improving the profitability of energy saving investments Top-1000 Energy Consuming Enterprises Programme to be expanded to Top-10,000 enterprises 5/15/201430/11/10

21 Poll 2 Which skill-set is your strongest card? a. Relationships with Chinese business b. Financing skills and resources c. Technology skills and resources

22 Chapter 4 GreenStream s Experience

23 GreenStream in China 5/15/201430/11/10

24 GreenStream s ESCO Model Utilising Nordic cleantech, often from SME s without access to Chinese market Leveraging existing relationships with Chinese industrial energy users developed through previous carbon business Based around a strong local team, with 19 people in our Beijing office Using the shared savings model, without dependency on support measures Financed by GreenStream and Finnfund, with additional leveraging of capital cost sought from local finance partners (especially those eligible under the CHUEE programme) 5/15/201430/11/10

25 Henglian ESCO Example Installation of vacuum system of Runtech Systems (Finnish SME) in Henglian Paper Mill in Nov 2013 generating 35% energy savings over the baseline annual savings of 2500 MWh of electricity, m3 of water, 1503 t of steam, 507 TCE of standard coal and overall 2670 tco2e emission reductions Secondary benefits of higher quality paper and more flexible industrial process Henglian Shandong Group requesting additional installations given success of the project Regular monthly payments of shared savings 5/15/201430/11/10 25

26 Lessons Learned Blend of competencies required: Technical skills and project management experience Financing and risk management Relationship with energy users and technology providers Despite high level political support there is still ignorance (and even mistrust) of the ESCO concept by lower level regulators Energy users are focused on turn-key technology based solutions rather than integrated service offerings The lack of liberalisation in currency and electricity markets create barriers to more effective use of EPC in China Local financial entities becoming interest in ESCO industry but have yet to fully engage

27 EFFI Concept for the Chinese Industrial Market Objectives Create business opportunities to Finnish SME companies with energy efficiency solutions Find essential information on business practices in Chinese industry Improve competitiveness of participating companies in Chinese market Develop feasible cooperation model Enhance visibility of Finnish energy efficiency solutions Themes and Topics IPR issues Certificates in China Financial schemes Industrial benchmarks Industrial and academic technology ambassadors Top level political and economical networks Competitiveness of Finnish companies

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