Guest blogger Tristan Edmondson (right), partner at Mint Research, a clean tech consultancy, describes China’s growing Energy Service Company (ESCO) industry.
China has one of the worst ratios of energy use to GDP in the world, two and a half times the world average. This undoubtedly creates investment opportunities for a country that is awash in capital. But despite the huge potential of China’s ESCO industry, it has yet to approach the size of the ESCO industry in the US where it is an industry worth six billion dollars a year.
What is an ESCO?
Under an energy performance contract, ESCOs install energy saving technologies and methodologies and then share the resulting savings with the customer, so paying off the capital investment. Here are some examples:
- Honeywell International, acting as an ESCO, helped Asahi’s Shenzhen brewery become more energy efficient. Energy saving methods included upgrades to heat recovery, cooling and control systems, with the resulting energy cost savings shared between the Honeywell and Asahi. After the energy performance contract expires Asahi will continue to enjoy reduced energy bills at no additional cost.
- The production of electricity using energy that would otherwise be discarded is also organised along ESCO lines. Dongying Shengdong EMC Ltd (DSE) installs electricity-producing boilers that burn waste gases, such as coal mine methane or waste gas from coking plants. Clients of DSE provide waste gas free of charge to act as a feedstock, and buy the on-site electricity from DSE at a lower cost than grid electricity. Revenue-sharing arrangements usually lasting 10 years enable DSE to recoup its capital in about two years, and then maintain a profitable operation and maintenance relationship for the rest of the contract.
- Beijing PowerU is a provider of chilled water cool storage technologies that save energy. The company has installed solutions under energy performance contracts for a variety of customers including Shanghai’s Pudong Airport, LG Philips’ electronics factories, semiconductor manufacturing plants, five-star hotels and other large-scale air conditioning users.
Although energy is relatively cheap and often subsidized in China, the sheer scale of energy inefficiency means there are Read the full story
There have been mixed messages lately about whether China will soon adopt a carbon emissions trading scheme. On the eve of President Hu Jintao’s speech at the UN Climate Summit in New York last month, Times Online ran a sensationally misleading story suggesting that China would adopt a carbon emissions trading scheme that would “for the first time, place limits on the amount of greenhouse gases Chinese industries are allowed to emit.” The article went on to say:
A delegation from the China Beijing Environmental Exchange (CBEEX), a government-backed platform for trading environmental equity, will outline the details in New York this week at a UN conference on climate change.
Obviously, this turned out to be a complete non-event. CBEEX is just one of a handful of private entities (see previous post “Tianjin to Win the Environmental Exchange Race?“) seeking to be launch pilot pollution credit trading platforms. The truth is that they are no where near to launching the kind of economy-wide carbon emissions trading scheme that Times Online suggests. China does not even have a mandatory cap on emissions, without which a “cap-and-trade” system would be meaningless.
Yes, CBEEX and their new French partner, Blue Next, did make a showing at the UN climate summit, but only at the sidelines, and merely to promote their own efforts to develop their own standard for voluntary carbon offsets, kitschily called the “Panda Standard“. Nothing about a mandatory trading scheme, and certainly nothing even in the nature of a liquid secondary market of emissions trading–the fact that the Panda Standard speaks to voluntary carbon offsets indicate they are only considering the primary market. (For a distinction between primary and secondary carbon markets, see previous post “China Carbon Forum 2008 Review.”)
CBEEX made the news in August when it announced that it had Read the full story