Funding energy efficiency, PRD, China

The Guangdong municipal Government in South China has created an energy efficiency funding scheme, not unlike CP3 (Cleaner Production Partnership Programme). For energy and environmental improvement projects RMB 300 million (Approx. US$ 44 million) has been allocated for 1:1 cost match basis. Also upto RMB 300,000 (approx US$ 43,000) is available for a specific project proposal.

[PRD – the Pearl River Delta region]

by John A. Herbert, Consultant, Kelcroft E&M Limited
helping lower the cost and impact of doing business in Asia

Alternate EE models

Energy Efficiency might well be the fastest, least intrusive and lowest cost solution to implement energy conservation projects that also lowers your carbon footprint, the McKinsey report even highlights these opportunities. However, it does not take way from the fact that little improvements have been made.

This report dated March 2009 covers much of the same ground, only offering legislative improvements to encourage take up of energy services.

John Herbert
Consultant
Kelcroft E&M Limited
helping lower the cost and impact of doing business in Asia

International Energy Efficiency Finance Protocol

Hope on the horizon for ESCO’s and Energy efficiency projects? EVO has released (April 2009) a new publication (cover see right) titled International Energy Efficiency Financing Protocol or IEEFP to tackle the issue of bank training.

This guide is based on work conducted by EVO in Mexico, and Thailand is targeted at your local financing institution, primarily banks, essentially helping them to understand and evaluate energy efficiency project finance risk.

As mentioned here ESCO’s historically suffer from a  weak balance sheet, and often find difficultly finance for viable energy projects, one of the reasons most often cited being Financial Institutions lend only based on collateral.

Considering the financial chaos gripping the US, perhaps that prudence should have been extended across all sectors of banks activities?  Anyway, the present approach, demanding asset based collateral, overlooks the benefits of energy efficiency improvement projects, including the income stream from lower energy costs and to some extent lack of understand the mechanics of energy efficiency programmes.

This guide aims to show financial institutions how energy projects that generate energy savings, result in cash flow revenue, and can increase credit capacity for repayment of loans. It is comprehensive overview including a plan for a two day training programme, what expected risks strategies from new and emerging technologies one might encounter.

Unlike the Hong Kong’s recently launched Buildings energy funds it clearly states the obvious, the need for Investment grade energy audits and M&V (Measurement and Verification) to ensure that projects are sound and that projected energy savings are sustainable.

Risk is always an issue, especially for banks entering new territory, recognizing the outstanding opportunities and potential benefits multinational financial institutions (MNF) such as IFC created a programme for help manage the credit risk, for example this publication cites the experience from using IFC/GEF Commercializing Energy Efficiency Finance (“CEEF”) programme.  Locally, we already have IFC’s CHUEE programme which is entirely focused on China energy efficiency projects.

I agree that education, and edcuating the banking sector as a whole, not one person at a time, is a critical issue for wider adoption of energy efficiency improvement projects.  So will this guide answer all of your questions? Unfortunately no, as stated in the preface, it only provides a framework, it is intended as a starting point for a series of further IEEFP programmes and a perhaps a teaser for their two day training course.

Overall yes it is a useful energy efficiency primer, IEEFP 101. It does provide the bare bones of a programme, however key points are only covered with a list of bullet points and likely to leave the reader equally unsatisfied.

John Herbert
Consultant
Kelcroft E&M Limited
helping lower the cost and impact of doing business in Asia