Innovative Energy Performance Approach for Energy Efficiency and GHG Emission Reduction in the Chinese Chemical Industry

The Chemical Industry Energy Efficiency and Emission Reduction project aims to implement energy efficiency (EE) projects in China’s chemical industry, first through support offered by a two-part project preparatory technical assistance (PPTA) initiative, and second on a sustainable basis. Part 1 of the PPTA initiative developed an innovative energy service company (ESCO) financing structure thanks to close collaboration between China National Chemical Corporation (ChemChina), China Haohua Chemical Group Co., Ltd. (CHC), potential ESCOs and other stakeholders.   After the financing mechanism and overall loan arrangements had been firmly established under Part 1, Part 2 of the PPTA was launched and Econoler was contracted to implement it.

To implement Part 2 of the PPTA, Econoler carried out the following tasks:

• Assessed ChemChina’s and the chemical industry’s potential for EE and greenhouse gas (GHG) emission reductions;
• Evaluated the capacity of the ChemChina subsidiary CHC, the proposed ESCO, and the entire chemical industry to invest in EE and implement energy savings projects;
• Carried out a strategic assessment of the required EE improvements in the chemical industry to meet targets to be established in China’s 13th Five-Year Plan (2016-2020);
• Conducted a due diligence of the two initial proposed pilot energy retrofit projects in the PVC plastics and fluoropolymer sectors to assess economic and implementation risks, as well as technical feasibility;
• Provided technical assistance to CHC for developing China’s first ever ESCO (CHC ESCO) specialized in the chemical process sector, including: (1) assessing CHC capacity to develop and implement EE projects using an EPC approach; and (2) providing general capacity building and specific training on the technical, financial and managerial aspects of ESCO operations;
• Assessed the proposed contractual arrangements between CHC ESCO and its clients;
• Formulated recommendations on current CHC business plans to ensure financial viability and sustainability;
• Supported CHC and the selected financial institutions issuing loans by analyzing their capacity-building needs;
• Provided training recommendations according to identified capacity-building needs;
• Assessed CHC financial management capacity and the proposed management team and provided a procurement plan for the first 18 months of project implementation;
• Supported CHC ESCO in implementing two energy efficiency retrofit pilot projects by reviewing final technical specifications, savings and implementation cost evaluations, as well as procurement documents;
• Prepared all the documents required for both ADB loan approvals and implementation activities;
• Supported scaling-up efforts for market development by providing a list of potential new energy retrofit projects and producing technical guidelines on the two selected pilot energy retrofit projects.

  At project completion, a sound technical, economic and financial due diligence review of the two selected pilot energy efficiency retrofit projects had been carried out and all key stakeholders gained the appropriate capacity for implementing and financing projects. This innovative project also enabled the creation of a sustainable market for EE projects financed using an EPC approach in China’s chemical industry.