OREANDA-NEWS.  June 11, 2013. Industrial Bank (IB) and the Promotion Center for Electric Power Demand Side Management in the Industrial Area (the “ Promotion Center ) held the ceremony for the execution of strategic cooperation memorandum in Beijing . Both parties plan to carry out all-round cooperation in the promotion of electric power demand side management in the industrial area. Pursuant to the agreement, IB promises to arrange green financing of tens of billions of RMB within the coming five years for electric power demand side management projects in the industrial area, so as to boost the upgraded green industry in China.

Xiao Chunquan, Director General of Bureau of Operation Monitoring and Coordination of the Ministry of Industry and Information Technology (MIIT), Wei Zhaofeng, Vice President of China Electricity Council, and Liang Pingrui, General Manager of the Sustainable Finance Department of IB attended the signing ceremony. The attendees also include representatives from the Ministry of Finance (MOF), the National Development and Reform Commission (NDRC), and the authorities for industry and information technology in Beijing, Ningxia, Guangxi, Guangdong, Fujian, Inner Mongolia, Shanxi, and Heilongjiang, etc.

A Big Room for Industrial Energy Conservation

It was put forward at the 18th CPC National Congress “to boost the building of ecological civilization, drive the fundamental transformation of resource utilizing method, intensify the all-course conservation management, and reduce the energy consumption intensity significantly, improve the utilization efficiency and benefits, and control the total energy consumption”. As revealed by relevant data, industrial energy consumption accounts for more than 70% of China's total energy consumption, and industrial power consumption accounts for over 73% of the total. However, the industrial added value created only accounts for about 40% of the country's GDP. If the power consumption method for the development of industrial economy continues the conventional model of scale expansion, it would be hard for the endowed conditions of energy resources and carrying capacity of ecological environment to support the development.

In order to enhance the efficiency of industrial power consumption and drive energy conservation and consumption reduction, China has pushed forward electric power demand side management in the industrial area as an important task in recent years. Electric power demand side management (DSM) refers to the power consumption activities carried out to achieve low-cost electricity services for the purpose of saving energy and protecting environment.

The main jobs include the load management over end users, equalization of power consumption load, improvement of the efficiency to use terminal energy, and realization of overall resource planning. It is of considerable social and economic benefits to implement DSM. For the society, the implementation of DSM may reduce power demand, thus cutting down the consumption of primary energy and emission of pollutants, alleviating environmental pressure, and decreasing the input of social resources and consumption of natural resources. For power consumers, it may reduce power consumption, decrease expenditure of electricity charges, lower the business cost of enterprises and improve the competitiveness of products.

In January 2011, the “Guiding Opinions on the Effective Implementation of Electric Power Demand Side Management in Industrial Area” of the MIIT came into effect officially. In 2012, under the guidance of the Bureau of Operation Monitoring and Coordination of the MIIT, with China Electricity Council serving as an important support organization, the Promotion Center was established and relevant pilot sites were launched. In this way, the electric power demand side management in the industrial area ushered into a brand-new stage.

The pilot sites for electric power demand side management in the industrial area follow the mode of “serving enterprises, free-of-charge diagnosis, comprehensive governance, and third-party assessment”, namely the Promotion Center will organize professional electric power service suppliers to carry out power-saving diagnosis for pilot industrial enterprises and propose reforming solutions, and enterprises may choose to implement power-saving projects based on their own conditions or entrust professional electric power service suppliers to implement power-saving projects. The mode not only guarantees the effect of power-saving projects effectively, but also relieves enterprises from worries about the influence of project implementation to the safety of manufacturing process, thus really ensuring power conservation of enterprises without impact to the production.

Solving the Financing Problem of Electric Power Service Suppliers

In the pilot sites for electric power demand side management, a considerable number of electric power transformation projects are carried out by professional electric power service suppliers for pilot enterprises in reference to the energy performance contracting (EPC). Nevertheless, due to the characteristics including great input in the early period, long period for sharing the power-saving benefits and recovery of funds, and “light assets” of electric power service suppliers, they only have a limited amount of capital for making investment in the power-saving industry depending on their own rolling development. Besides, electric power demand side management in the industrial area is a field unknown to most financial institutions, and it is hard to quantify the project operation quality and energy-saving benefits and to judge the project risks and incomes as power-saving projects often involve complicated technologies, such electric power service suppliers often find it is very difficult to receive credit fund support from banks which cannot apply the conventional banking risk management methods.

An relevant official of the Promotion Center indicated that, based on the above considerations, the cooperation with IB was anticipated to form an innovative market-oriented model, which is characterized by linked development, integrating the three factors of policy, technology and finance by relying on the professional service capacity of IB in the field of energy conservation and environmental protection, with a view to initiating the cooperation between the professional technical platform for industrial electric power conservation and financial institutions.

As introduced by relevant officer-in-charge of the Sustainable Finance Department of IB, the bank has released a special comprehensive financial service solution, which consists of “three products and one conception” for electric power demand side management, aiming at providing all-sided, convenient and specialized financial supports and services. Specifically, the “three products” are respectively: financing for power-saving projects of electric power service suppliers by using the future usufruct as the pledge, credit financing for purchasers of industrial enterprises, and order financing for electric power service suppliers, which may correspond to various capital demands of industrial power-saving projects; the “one conception” is to set up the “Industrial Power-saving Service Industry Fund” or other relevant funds jointly with the Promotion Center and other institutions considering the subsequent market needs, so as to further achieve effective connection between industrial power-saving projects and social funds.

In addition, IB also promises to arrange financing of tens of billions of RMB in the coming five years for electric power demand side management projects in the industrial area, and give priority to such projects with its configuration scale and business recourse to provide a green approval channel. Moreover, it will increase the organized financing scale according to the progress in pilot sites. With the cooperation, IB hopes to get fully involved into the electric power demand side management projects in the industrial area, and boost the building of an upgraded green industry by following the trend of policies, listening to the market voices, and serving the industrial development, so as to contribute more green value to the market and the society.

As learnt by the reporter, in this year, IB will celebrate the 25th anniversary of its founding and the 5th anniversary of becoming the first Equator bank in China . The bank indicates that, in order to further support the development of energy conservation and environmental protection in China and boost the building of “Beautiful China”, it will devote itself to improving the specialization of products and services by concentrating on the niche market of energy conservation and environmental protection.

By the end of the first quarter of 2013, IB has accumulatively provided financing loans of RMB 243.2 billion in the area of energy conservation and pollution reduction, with its financing balance reaching RMB 126.9 billion. The projects supported by green finance of IB have saved 23.2455 million tons of coal equivalents across China each year, reduced 67.0502 million tons of carbon dioxide, 889,200 tons of chemical oxygen demand (COD), 15,400 tons of ammonia nitrogen, 43,600 tons of sulfur dioxide, and 11,300 tons of oxynitride, utilized 15.2174 million tons of solid waste in an integrated manner, and saved 255.7906 million tons of water. The annual emission reduced in the above projects is equivalent to shutting off 153 thermal power plants of 100 MW or stopping running 100,000 taxis for 32 years.