China: World Bank to Help Improve Energy Efficiency in Shandong

June 9, 2011

WASHINGTON, DC  June 9, 2011 -- Today World Bank Board of Executive Directors approved a loan of US$150 million to the People’s Republic of China to improve energy efficiency in Shandong Province, particularly through energy efficiency leasing arrangements and increased use of biomass for power and heat generation.

China is making unprecedented efforts to improve energy efficiency, and launched an ambitious set of energy conservation policies, regulations and programs during the 11th Five Year Plan (2006-2010). The new 12th Five Year Plan (2011-2015) lays out a path for continued efforts in energy conservation.

Provincial governments play a critical role in implementation of the country’s energy conservation drive, because this is the government level that interfaces with energy consumers, consolidates resources for specific activities, and organizes implementation on the ground. 

The Shandong Provincial Government is faced with the challenge to accelerate delivery of energy efficiency through the timely but effective design and implementation of largely new, comprehensive energy conservation programs. To help address this challenge, the Shandong Energy Efficiency Project will focus its support on financial leasing and Energy Performance Contracting (EPC) of energy efficiency investments in selected enterprises, particularly in the industrial sector. Another component of the project is to provide support for the Anqiu Biomass Combined Heat and Power Plant, including 2x15 MW units and steam network to nearby industrial customers and district heating network for space heating. In addition, the project will strengthen project management and monitoring and evaluation capacities.

“Shandong’s energy intensity reduction challenges are representative of the energy efficiency opportunities and barriers facing other Chinese provinces,” said Gailius Draugelis, World Bank’s Senior Energy Specialist and Task Team Leader of the project. “Through the successful use of financial leasing for energy efficiency investments and the EPC mechanism, we hope to contribute to Shandong’s energy efficiency service industry development objectives, and continue to support China’s overall efforts to develop innovative and scalable energy efficiency business models and build a resource-saving society.”

The World Bank loan of US$150 million accounts for 47 percent of the total estimated project cost of RMB2.1 billion or about US$317.1 million. Shandong Province is also one of the three provinces for the recently Bank-approved Provincial Energy Efficiency Scale-Up Program funded by a grant from the Global Environment Facility.

Energy efficiency is one focus of the World Bank program in China. In the last several years, the Bank Group has scaled up its support for design and implementation of energy efficiency programs. The Provincial Energy Efficiency Scale-Up Program, approved in March 2011 and supported by a Global Environment Facility (GEF) grant, assists Shandong and two other Chinese provinces to meet their energy efficiency goals by strengthening their institutional systems, improving implementation capacity, and deploying more market-based incentive mechanisms for energy efficiency investments. Other projects include a GEF and World Bank loan-funded China Energy Efficiency Financing (CHEEF) and a follow-on World Bank loan funded CHEEF II, a GEF-funded Energy Efficiency Promotion in Industry Project, approved in May 2011, and China Utility-Based Energy Efficiency Finance Program I & II supported by the International Finance Corporation (IFC), the private sector arm of the World Bank Group. 

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