06 March 2019
In China, the building sector accounts for about 30% of total final energy consumption. Building energy efficiency thus plays a key role in achieving the national climate target. The ambitious target has substantially driven the demand for energy refurbishment in the building sector. In the last decade, the Chinese government has rolled out a number of policies, including a significant amount of subsidies, to improve building energy performance and sustainability. Public financing has provided a major incentive for various market actors. However, given the huge financing gap, public subsidies alone are far from sufficient to mainstream sustainable building development and refurbishment in China. Thus, it is essential to develop innovative financing mechanisms for attracting private investment to fill in the immense financial gap to reach the national greenhouse gas reduction target. Energy Performance Contracting (EPC) provided by Energy service companies (ESCOs) is a popular market-based mechanism for building energy retrofitting. ESCOs in China however, especially, those of small and medium size, have limited access to financing, which represents a key challenge for realizing energy efficiency projects in the building sector at a substantial scale. At the same time, financing energy efficiency projects in the building sector represents an attractive investment opportunity for financial institutions due to the high overall investment volume and the decreased risks due to energy efficiency improvements. However, financial institutions also face substantial barriers to seize these benefits and accelerate green financing for building energy refurbishment and ESCOs.
Against this background, SusBuild developed a new report that draws lessons from European and global examples that address various barriers faced by ESCOs and financial institutions. The presented instruments and financing products have supported access to financing of ESCOs in several countries worldwide and may inspire market actors in China. The range of examples covers recognizing future receivables from energy savings, green securisation, standardizing the underwriting process, prequalification certificates for ESCOs, facilitators between ESCOs and building owners and insurance mechanisms for energy efficient projects.
Taking into account the good practice examples and the current market situation in China, the report concludes with a set of recommendations on green credits, green securities, and other supportive mechanisms for financial institutions, which could be beneficial to seize the opportunity to scale up sustainable building development and refurbishment in the future.
The full version of the report can be downloaded from our Library.