Eu sme centre esco webinar 2014 05-08
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Transcript of Eu sme centre esco webinar 2014 05-08
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Webinar on the Energy Efficiency Market and Energy Service Companies in China
Karl Upston-Hooper, 8 May 2014
A project funded by the European Union
Speaker biography
Karl Upston-Hooper, General CounselGreenStream Network plc
Karl Upston-Hooper is the General Counsel of GreenStream Network plc, a position he has held since 2006. 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
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 SMEs growth in China
Chapter 1 – Why Energy Efficiency?
China’s Energy Problem
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China’s energy intensity (per unit of GDP) is 4.32 times that of the EU
China’s Energy Solutions
• 11th Five Year Plan set a target of cutting energy consumption per unit of GDP by 20%
• Top-1000 Enterprises programme launch in 2006
• 12th 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
Chapter 2 – What is ESCO?
What is EPC & ESCO?
• 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
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“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 24915-2010
Shared Savings in a Nutshell
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EnergyCosts
MaintenanceCosts
EnergyCosts
MaintenanceCosts
EnergySavings
X% to ESCO
Y% to User
for agreed number of years
with or without MRV
with or without subsidies
Chapter 3 – The Evolution of ESCOs in China
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
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Growth of EPC in China
2003 2004 2005 2006 2007 2008 2009 20100
500
1000
1500
2000
2500
3000
3500
4000
4500
Total Energy Performance Contracting Investment in China, 2003-2010 (USD Millions)
Total Energy Performance Contracting Investment in China, 2003-2010
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Source: EMCA, 2010 China ESCO Industry Summit meeting proceedings
EMCs in China
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• 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%
Top 20 ESCO Companies
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Beijing HerropSys 北京和隆优化控制技术有限公司
HaiSheng Artificial Environment 沈阳海盛人工环境有限公司
ZhongYiNeng thermal 包头市中益能供热技术有限公司
Gansu Minghai 甘肃铭海节能技术有限公司
Jiangxi Huadian 江西华电电力有限责任公司
SuZhou JiNeng Elctro 苏州吉能电子科技有限公司
ZhongJi Energy 上海中际能源科技有限公司
YunMai 云南云迈新能源开发有限公司
Siemens China 西门子工厂自动化工程有限公司
Beijing KINEETA北京仟亿达科技有限公司
RanHe Energy Conservation赤峰和然节能技术服务有限责任公司
Eastern GreenSource 东方绿源节能环保工程有限公司
Ordos City Sustainability 内蒙古鄂尔多斯循环经济研发有限公司
CECEP Industrial Energy Consveration 中节能工业节能有限公司
SET Institute, China Petro 中国石油集团安全环保技术研究院
Zhejiang EcoWell 浙江科维节能技术有限公司
SuZhou Best Area Power 苏州太谷电力有限公司
Beijing SNTA 北京思能达节能电气股份有限公司
Schneider-Electric China 施耐德电气(中国)有限公司
CECEP Technology and Investment 中节能科技投资有限公司
36,604
37,500
38,138
38,529
42,000
42,000
45,687
48,439
50,046
58,115
59,800
72,627
77,000
77,200
81,536
81,935
153,846
200,000
224,100
587,089
Current State of Play
• 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
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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
Chapter 4 – GreenStream’s Experience
GreenStream in China
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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)
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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, 688.800 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 04/13/202330/11/10
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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
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EFFI Concept for the Chinese Industrial Market
• 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
• IPR issues
• Certificates in China
• Financial schemes
• Industrial benchmarks
• Industrial and academic technology ambassadors
• Top level political and economical networks
• Competitiveness of Finnish companies
Objectives Themes and Topics
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