Energy Efficiency Financing in China: A New Report

coal, ship, china, energy, yangtze, flickr creative commons

Coal ship on Yangtze River by Flickr user nothingexceptionalhere

Energy expert and consultant Robert Taylor has just released a new study on the state of financing for energy efficiency projects in China. Entitled Next Steps for Financing Energy Efficiency in China, the report is available for download here in both English and Chinese.

A few of the key points to consider in the Chinese energy efficiency market are identified by Taylor as follows:

  • There is strong demand for energy conservation projects, especially due to the 12th 5-Year Plan. This demand is heavily concentrated in the industry sector.
  • While there are multiple project financing options available, large companies still face high debt loads and SME’s may not be able to secure funding.
  • Energy efficiency financing is still a niche market for many financial institutions.
  • China’s financial system is still in transition from planned economy to market-based system.
Taylor’s report goes on to detail not only generalized challenges to financing energy efficiency projects, but also the hurdles faced by Chinese financial institutions trying to meet the growing needs of this market segment. He points out that while many new initiatives have come on-line in the past several years. the growing need for energy efficiency financing is still not being adequately met. The report considers several different methods of project financing, and also considers a role for international assistance and cooperation.

The three areas identified as potentials for cooperation may be of particular interest to Alliance partners:

  • Project concepts with Chinese banks or guarantee companies: technical assistance projects to develop and strengthen energy efficiency lending in SME programs and integrating energy efficiency lending into the portfolios of Chinese banks.
  • Provincial-level project concepts: capacity building and financing at the provincial level, in addition to  potential partnerships between provincial governments, third party energy efficiency groups, and financial institutions.
  • Financial support for ESCOs: in the fast growing Chinese ESCO industry, support is needed particularly for small and medium-size ESCOs in the form of cooperative work or partnership development with larger ESCOs or larger financial institutions.
You can read more about Robert’s research and China projects on the website of The Institute for Industrial Productivity.