FEATURE STORY

Program Helps Reduce Energy Bills, Protect the Environment in China

November 12, 2014


World Bank Group

STORY HIGHLIGHTS
  • "Energy Performance Contracting" - a market-based energy saving mechanism was introduced and demonstrated in China through the World Bank Financed program.
  • The program aims to encourage Chinese commercial banks to finance energy efficiency projects and to improve China’s market-based mechanism and system.
  • The projects that have received loan support from the program are expected to reduce energy consumption by 2.13 million tons of coal equivalent and CO2 emissions by 5.11 million tons per year.

Xu Zhenhua started his career as a founding member of Wuxi’s first thermo power plant in 1982. Thirty years later, he led the work to close it.

“We had mixed feelings to see it shut down. Many colleagues and I spent our best years in the plant. But we knew the plant is a polluter and its closure was for the benefit of the whole city and the environment,” said Xu, general manager of Wuxi Xielian Thermos Heating Co.

The plant, after its closure in 2012, was converted into a heating steam distributor for a thermo power plant in neighboring Suzhou. Both Wuxi and Suzhou are prosperous cities in East China’s Jiangsu Province.

The conversion didn’t come cheap. A pipeline system needed to be built to channel steam from Suzhou to Xielian and then to end-users. A total of 433 million yuan ($69 million) was needed for the project.

“Money was a big headache,” Xu said, adding that his company was able to raise only 173 million yuan ($27 million) from its coffers for the project.

A loan from Huaxia Bank helped solve the problem. The $20 million (126 million yuan) loan is a part of a $400 million loan that the World Bank provided to China for the China Energy Efficiency Financing (CHEEF) Program, implemented between 2008 and 2016. The Global Environment Facility (GEF) also provided $13.5 million in grants to the program.  

Under the program, the Bank first provided funds to three Chinese banks—the Export-Import Bank of China, Huaxia Bank, and Minsheng Bank. Combined with about $900 million in counterpart funding, these were then lent to enterprises. The aim was to encourage Chinese commercial banks to finance energy efficiency projects and to improve China’s market-based mechanism and system for such projects.

But for residents around the former thermo plant where Xu worked, the result is more tangible: a big pollution source is gone. “Even the area’s property prices went up after the plant was shut down,” Xu said.

The way Xielian worked with the Suzhou plant is promoted in all of Jiangsu as a model in the province’s push to reduce emissions and increase energy efficiency. The company’s success story has crossed the province’s borders to other parts of the country. Xu said many officials from different provinces and all the five major power companies of China have come to learn from Xilian’s experiences.

Xu, 52, said he felt he had started a new life in his new post.

Before, he spent the bulk of his time doing routine management work, from purchasing coal to every process of power generating. Now he is more involved in research and development to cut the loss of heat in transmission and to help customers to use the steam more wisely.

“I enjoy what I am doing, really,” he said.



" Everybody talks about smog and air pollution every day. I am glad I am one of the people to reduce it. I hope through our efforts, my grandchildren will not have the same concerns in 20 years. "

Cai Yuchi

company’s founder, the Shanghai CIEBO Energy Science and Technology Co Ltd


The Shanghai CIEBO Energy Science and Technology Co Ltd is another beneficiary of the CHEEF program. The company is a private energy service company, which helps customers save costs by reducing energy consumption and recoups its own investment through these savings. It is called “Energy Performance Contracting”, a market-based energy saving mechanism introduced and demonstrated in China through the CHEEF program.   

CIEBO obtained a $4.2 million loan through the Huaxia Bank for a 73 million yuan ($12 million) project in Shanxi Province for utilizing excess coke oven gas from a coking plant furnace to generate power. The project was expected to save energy of 26,050 tons of coal equivalent and reduce 63,600 tons of CO2 per year. 

The company’s founder, Cai Yuchi, is a typical businessman from Zhejiang Province, famous for producing private entrepreneurs with nose for new opportunities. 

After spending more than a decade in electrical equipment manufacturing, he saw an emerging market for energy service. But only in the past 10 years has his company’s energy conservancy business really taken off. 

“It is a new concept. I have to spend time to persuade my potential customers into trying it,” said Cai, 48, from his office overseeing the Bund of Shanghai. 

As he managed to secure some clients, another problem emerged – lack of financing. A loan through the CFEEH Program served as a much-needed endorsement for the new business as well as the company, he said. 

“It means a lot to us. Before, Chinese commercial banks were generally not willing to give loans to private companies like us because it was often difficult for us to get strong guarantees. Now the World Bank is serving as an example for them.” 

Cai strongly suggested the World Bank give more support to China’s energy efficiency sector. “There is so much to do,” he said. 

Cai admitted that he ventured into the energy service sector because he saw potential business opportunities. Later he realized what he does is in line with government policy and good for the environment. 

“The World Bank program made me aware that this (energy efficiency) is indeed a global trend,” he said.

He added, “Everybody talks about smog and air pollution every day. I am glad I am one of the people to reduce it. I hope through our efforts, my grandchildren will not have the same concerns in 20 years. ”

As of March 31, 2014, CHEEF Program Phase I, together with counterpart funding from participating banks and enterprises, has financed more than $900 million investment in energy efficiency, with $178 million in a World Bank loan which leveraged $717 million from participating banks and industrial enterprises. The projects that have received loan support from the CHEEF program are expected to reduce energy consumption by 2.13 million tons of coal equivalent and CO2 emissions by 5.11 million tons per year.


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