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China ESCO market. Does not ramp up?

China ESCO market a long road to walk

China ESCO market. Does not ramp up?

As everybody knows, the China ESCO market has a huge potential. China is the world’s biggest energy consumer and its energy efficiency technology in residential, commercial and industrial installations is highly inefficient.

A 2013 Master´s Thesis by Ding Ma, Aalto University School of Economics, offers a detailed vision of the Chinese energy services companies. When it describes the barriers and drivers of China ESCO market the immediate conclusion is that ESCO model barriers are universal.

China ESCO market issues

Ding Ma identifies as problems: the lack of financial solutions, expertise, clear technical standards and trust. The Chinese legal framework doesn´t help.

Seen from the Spanish point of view, here we have to remember what the European ESCOs Market Report 2013 formulates as legal and political barriers inside the EU:

  • “Erratic and incalculable legislation can block ESCO markets”
  • “The lack of official and/or generally accepted ESCO definition and/or certification scheme and/or standards hinders the ESCO market”

On the other hand, the same authors P.Bertoldi, B. Boza-Kiss, S. Panev and N. Labanca with T. Serrenho and C. Cahill in the ESCO Market Report For Non European Countries 2013 have a positive vision of the Chinese Government attitude front the energy efficiency issues. With respect to the China ESCO market obstacles, they literally say:

China ESCO market a long road to walk

The Great Walk, shot by
Bernard Goldbach

“Two major barriers to ESCO market development in China are represented by the low energy prices and by a low level of market integrity (Pengcheng et al., 2011). Low energy prices, partly due to energy subsidies applied by the government to foster the economic development of the country, discourage companies and energy end-users in general, to invest on energy efficiency, whereas the low level of market integrity can be partly associated to a situation of scarce awareness among the energy end-users about the ESCO concept. This situation is determined both by a lack in the provision of information to energy end-users and by a lack of skills and technical competences often registered within companies acting as ESCOs.

The latter aspect has probably to be considered as the most important obstacle to the provision of proper information, as competency and expertise on the supply side are the first pre-requisite to make people aware about the ESCO business and related opportunities. Barriers related to lack of information and technical competence combine then with the absence of standardized procedures for energy audits and measurement and verification (M&V) of energy savings in China. All together, these obstacles create a situation of mistrust on ESCO business among potential clients. This situation is then worsened by a lack of laws and regulations guaranteeing the application of the clauses included in EPCs in case expected energy performances are not achieved by projects implemented by ESCOs”.

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