xiao yu - esco industry in china
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ESCO Industry in China:
Status and Way Forward
Xiaoyu Shi June 2011, Manila
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World Resources Institute
A global environmental think tank that goesbeyond research to put ideas into action
Sustainability and development
Non profit organization http://www.wri.org/
Established in 1982
Headquarter in DC with Beijing Office
Over 200 staff
http://www.wri.org/http://www.wri.org/ -
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China ESCO Industry:Three Stages of Development
Agreedto
introduce
EPC
3 pilotEMCs
EMCAestablished;ESCOs loanguaranteeprogram
launched
taxation andincentive
policies forESCOs
Energyintensity and
carbonreduction
targets
1996 1998 2004 2010 2015
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China ESCO Industry:Three Stages of Development
$
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Continue to be growing at a fast pace To save energy to Vigorously promote energy conservation
7+ strategic emerging industries
Attention shifted to ESCOs and EPCs EE improvement in SMEs and Buildings
Greater leverage with private funding and wider options
New ESCO taxation policy and accounting rules
Cash rewards to eligible ESCOs and EPCs
New Era of ESCOs - 12th 5 YP?
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SWOT Analysis
STRENGTHS
Strong expertise in certain technologiesAbility to provide full-house services andflexibility to deliver customized servicesBusiness experience gained in past 15yearsFast-growing industry with increasing
popularity
OPPORTUNITIES
Conducive policy environmentHuge energy efficiency potentialGrowing funding sources (e.g, commercialbanks such as Industrial Bank Co., Ltd andother financial institutions)Low-hanging fruits already grabbed
Underdeveloped market in public sector
WEAKNESSES
Most ESCOs are small and lack ofcompetitive advantageLack of capitalLow credibilityLimited technological typesInsufficient management skills
Incomplete regulatory framework
THREATS
Insufficient access to commercial financingNarrow coverage of government incentiveprogramsEnergy user entities implement EE inhouse vs. outsourcingInternational ESCOs have stronger
technical, financial, and managerialexpertise
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Characteristics ofESCO Industry in China
Nascent Industry
Many ESCOs are:
limited assets & capital newly established have limited track
record and low marketrecognition
The industry has mixedtrack record and image
Regulatory framework isnot complete
Structural Conflict
Most ESCOs in China
are technologicallyfocused and strong But lack the full range of
skills and strengthsbusiness and finance
Misaligned with the needfor providingcomprehensive solutions
TechnologicalScope Constraint
Single technology (orlimited) Have proprietary
relationship with thetechnologies
Requires customers tocontract with multiple
ESCOs (transactioncosts) Reduce the size of each
transaction
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Insights from RFI
China Energy Efficiency AggregationRFI Response
Difference in EPC experience and limited track record
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Insights from RFI
China Energy Efficiency AggregationRFI Response
Limited technological scope
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Background:
Objectives:
ChinaEnergy Efficiency Aggregation Project
10 Miles
16 Km
Projects clustered in SW Shanghai
Activities:
Wide supports on energy audits1/3 of identified EE projects not implementedGovernment in search for new business model
Adopt a comprehensive approach todemonstrate the need, approach, process, andbenefits of aggregating small and medium sizedprojects in China.
Convening Hosts, ESCOs, financiersOrganizing workshop to explain EPC and the projectDeveloping tools to overcome barriers
Pre-screen Financing ChecklistEE Financing/Investment Decision-Making Supporting ToolRequest For Information and Proposal (RFI/P) template
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Growth opportunity newdevelopment of financial sector
Private equity funds / Venture capital enterinto EE market
Project financing
ESCOs
China, India, and others
Commercial Banks
Minsheng 1:5
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Way Forward what is it?
Aggregation Enabling environment / Eco-system
Regulation to encourage investment in ESCOs andfinancing ESCO projects
NPL financial sector
Quota similar to that to power generators
Accreditation
Rating
New Players Financial services providers
Third party project evaluators
Government qualified or accredited institutions?
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ACKOWLEDGEMENT
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