The CDTA will address the critical capacity gaps of NMG in designing and implementing a low-carbon development strategy through targeted package of policy, regulations, and financial incentives in promoting industrial energy efficiency and accelerate distributed renewable energy generation. The CDTA will also enhance NMG's capacity in structuring PPPs for clean energy investments through appropriate allocation of responsibilities and risks between private and public sector entities.
The CDTA will identify technologies and industrial processes to achieve the benchmark energy efficiency levels and assist NMG in establishing a technology transfer mechanism through technology providers, such as energy service companies (ESCOs). Since the ESCOs have the right technical expertise on appropriate technologies but are constrained by access to debt financing, the CDTA will be developing innovative financial products and instruments and recommend the establishment of a dedicated financing platform to mobilize financing for energy efficiency projects implemented by ESCOs and SMEs overcoming prevailing barriers. If successful, it can be introduced and replicated in other parts of the PRC.
Integration of distributed renewable energy sources poses a number of technical, institutional, and financial challenges for investments to flow in scattered but large number of small-scale renewable energy projects compared to a single large-scale project. The role of private investments in such projects cannot be emphasized enough. The proposed CDTA will review the current policy framework to introduce appropriate policy incentives through transparent regulatory regime, feed-in tariffs, and tax incentives to promote private sector investments through PPPs in distributed renewable energy.
|Project Rationale and Linkage to Country/Regional Strategy
Energy intensity reduction has been a major government initiative to address environmental and climate change impacts from a rapidly growing economy dependent on fossil fuels. During the 11th Five-Year Plan, 2006 2010, the initiative achieved a reduction of 19.2% in energy intensity. The 12th Five-Year Plan, 2011 2015 mandates a further 16% reduction in energy intensity. The government has initiated financial and policy incentives to stimulate investments to improve energy efficiency.
The 12th plan target for reducing energy intensity requires a more strategic approach to (i) transform industrial structure from energy-intensive primary industries such as iron and steel to high-tech industries with higher value addition and a smaller carbon footprint, and (ii) expand the services sector share of the economy. In addition, the energy supply mix needs to be transformed from carbon-intensive coal to renewable energy and low-carbon fossil fuels such as natural gas.
Ningbo is a city in Zhejiang Province with a population of 7.5 million. It is one of the major coastal cities in the PRC, featuring high-tech manufacturing industries and a relatively mature and sophisticated finance sector. Manufacturing is dominated by petrochemicals and high-tech products such as precision machinery, automobiles, and information technology equipment. Yet Ningbo retains many traditional industries, some of which still use obsolete and inefficient technologies. Limited access to debt financing, inadequate policies and regulations, and weak capacity constrain investment in more efficient technologies, especially constraining small and medium-sized enterprises (SMEs).
To enhance its efforts favoring low-carbon development, the NMG recently established the Office of Climate Change Mitigation under the Ningbo Municipal Development and Reform Commission and started in 2012 to formulate its low-carbon development action plan (LCDAP). The LCDAP emphasizes improving industrial energy efficiency and expanding the share of renewable energy and natural gas. The NMG is keen to introduce market-based instruments to promote private sector investments to improve industrial energy efficiency under the LCDAP.
Efforts to improve energy efficiency in Ningbo have so far been driven primarily by administrative measures targeting large enterprises, or those that consume more than 100,000 tons of coal equivalent per year. Under the 12th plan, the NMG has widened the scope by targeting enterprises that consume more than 3,000 tons of coal equivalent per year. Combined with concerted efforts to promote energy conservation in commercial and residential buildings, in public facilities, and in the provision of urban services such as heating and water supply, this lower threshold has brought renewed focus on energy efficiency improvement in SMEs.
Ningbo is endowed with excellent renewable energy resources that can help meet local energy needs and decarbonize energy supply. Solar energy technologies can contribute significantly to meeting the electricity and heat requirements of residential and public buildings. Heat and power plants fueled by biomass and municipal solid waste can provide electricity and heat in large urban areas. Heat pumps to extract shallow-ground geothermal energy can replace coal boilers in urban heating supply systems, thus decarbonizing heat supply.
The TA supports the PRC's 12th plan objectives of further reducing energy intensity. It is consistent with the Asian Development Bank (ADB) country partnership strategy, 2011 2015 for the PRC, which emphasizes environmentally sustainable growth, public private partnership (PPP), and SME development in low-carbon economic sectors. It complements and advances ADB's previous interventions and efforts to improve industrial energy efficiency through loans and nonlending projects, as well as by establishing emissions-trading markets in Tianjin and Shanghai. It will help the NMG identify actions and policies to be initiated under its LCDAP to accelerate the improvement of industrial energy efficiency and the shift to renewable energy. The TA aligns with the priorities of the Ministry of Finance and National Development and Reform Commission to develop innovative financing mechanisms to further stimulate energy efficiency and renewable and clean energy investments through market-based mechanisms.