China, People's Republic of: Strengthening Capacity for Low-Carbon Development in Ningbo

Sovereign Project | 47055-001 Status: Approved


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.

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Project Name Strengthening Capacity for Low-Carbon Development in Ningbo
Project Number 47055-001
Country China, People's Republic of
Project Status Approved
Project Type / Modality of Assistance Technical Assistance
Source of Funding / Amount
TA 8388-PRC: Strengthening Capacity for Low-Carbon Development in Ningbo
Technical Assistance Special Fund US$ 500,000.00
Strategic Agendas Environmentally sustainable growth
Inclusive economic growth
Drivers of Change Governance and capacity development
Private sector development
Sector / Subsector

Energy - Energy efficiency and conservation - Energy utility services

Industry and trade - Small and medium enterprise development

Gender Equity and Mainstreaming

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.

Impact Reduced carbon emissions and energy consumption in Ningbo
Project Outcome
Description of Outcome Market-based LCDAP attractive to the private sector is developed and launched
Progress Toward Outcome

The phase one of the TA was completed in November 2013. The TA has identified a market-based innovative financing imechanism to promote the energy efficiency in small and medium enterprise industries in Ningbo. This is a key component of the low carbon development action plan of Ningbo.

The Phase 2 of the TA has been reformulated to focus on demonstrating the low carbon energy consumption by optimizing the production and utilization of different forms of energy in an integrated manner. The Phase 2 of the TA has now been completed. The conceptual design and pre-feasibility study for integrated energy management system to optimize the energy needs for heating and electricity in Ningbo high tech park has been prepared. The possibility of implementing the proposed energy management system as a PPP has been explored.

Implementation Progress
Description of Project Outputs

Phase 1: A suite of policies, incentives, and financial products identified to promote investments in energy efficiency improvements

Phase 2: A survey of energy efficiency of key industries and buildings in the hi tech park is undertaken

Phase 2: Energy saving opportunities and technical solutions for minimizing the energy consumption and peak load of the park is identified

Phase 2: A regulatory scheme for the establishment of a micro-grid in the park is proposed

Phase 2: An action plan to mobilize financing and implement the energy management center

Status of Implementation Progress (Outputs, Activities, and Issues)

The Phase 1 was implemented from July to November 2013 and an innovative financing structure for leveraging social capital to complement limited government funds for financing low carbon development was prepared. This is now being considered for implementation by the Ningbo Municipal government.

The TA completion date was extended until 30 September 2015 to accomplish the work needed for the revised scope of Phase 2.

As a result of Phase 1, the LCDAP has identified, optimizing the energy consumption in the industrial sector, introducing innovative energy management practices, and encouraging distributed energy sources including renewable energy, as some of the key actions to be implemented. The government requested to focus on undertaking a feasibility study for deploying state-of-the-art energy management system to optimize the energy consumption in Ningbo High Tech Industrial Park (NHTIP) as a pilot project on low carbon urban distributed energy systems, and recommend the financing and implementation arrangements for the proposed energy management system for public-private partnership.

The Ningbo government, ADB and the consultants agreed on the scope and approach of the study at the inception workshop for Phase 2 held on 15 September 2014, which include (i) the feasibility of establishing a self-contained energy supply system to meet the electricity, heat, steam and cooling demand of the High Tech Park in an optimum manner, (ii) feasibility of establishing a mini grid within the High Tech Park with distributed CHP to meet the electricity and heating/cooling demand of the park with the Grid Company providing back-up supply, and (iii) identify institutional and regulatory barriers in establishing an integrated energy supply system and provide recommendations to overcome these barriers.

The current energy demand for electricity, heating and cooling in NHTP and the energy demand profile of the different types of consumers have been estimated. A detailed analysis of the performance of an existing natural gas powered CHP plant and steam supply network within the park has been undertaken. Due to the inadequate use of centralized heating and cooling systems, and suboptimal operation of the CHP plant due to inadequate steam demand and restriction on operation of the CHP plant at off peak times, it was proposed to increase the coverage and demand for centralized heating and cooling system by installing distributed CHP plants and lithium bromide absorption cooling units in key locations. The CHP plant objected to the proposal because (i) internal combustion engine based DCHP plants is not possible to be integrated in the existing steam supply network, and (ii) it intends to invest in CHP plants outside the NHTP to operate these CHP plants in an integrated manner to meet the steam demand of NHTP and the Eastern New Town Area. It was also identified that it is technically feasible to establish a microgrid to manage the electricity distribution system within the park.

The final workshop was held in June 2015. The study presented the analysis of the overall energy efficiency of Ningbo High-Tech Park (NHTP), including its major industries, buildings, and energy supply structure. It also determined the supply-side, and demand-side optimization measures and alternative solutions; assessed the feasibility of establishing a micro-grid and its energy management center; and evaluated the financial feasibility and the policy barriers of the proposed technical alternatives.

The main technical outcomes of the project include: (i) energy consumption survey and study on the opportunities of energy saving and peak regulation, including the different technical retrofitting measures, and non-technical measures to improve the energy efficiency; (ii) feasibility study of the application of distributed combined heat and power, comparing two combined heat and power alternative options (Option 1: expansion of the existing CHP capacity to improve its operating efficiency; and Option 2: introducing DCHP units in addition to the expansion of the existing CHP capacity, which identifies targeted cooling, heating, and electricity balance, operating hours, and total operating efficiency); (iii) feasibility study of distributed solar PV power generation; (iv) technical feasibility study of applying micro-grid concept and its energy management center, with recommendations; and (v) evaluation of the potential energy saving and carbon reduction of the overall technical solution.

On policy perspective, it recommended policy regime and incentives concerning the policy barriers to the implementation of the proposed technical solutions, particularly micro-grid establishment and energy performance contracting business model. Micro-grid establishment in the PRC is at immature stage of pilot testing and there are no national laws and regulations or administrative guidelines and standards are in place. The recommendations were: (i) to implement a pilot micro-grid project in NHTP, starting with the implementation of micro-grid concept energy management center; and (ii) financial and tax incentives were necessary to strengthen the regulatory mechanism to drive the development of EPC business model.

Geographical Location
Summary of Environmental and Social Aspects
Environmental Aspects
Involuntary Resettlement
Indigenous Peoples
Stakeholder Communication, Participation, and Consultation
During Project Design In September 2012, NMG submitted an application to MOF for a CDTA for Ningbo Low-Carbon Development as Ningbo had been selected as a low-carbon development pilot city by the government. It was agreed by MOF and ADB at the CPM in December 2012 to include the proposed CDTA in the nonlending TA pipeline to be supported by ADB in 2013. ADB has fielded a reconnaissance mission to Ningbo city in January 2013 to obtain a better understanding on the objectives and overall scope of the CDTA. The mission was informed by NMG that they prefer to focus the proposed CDTA on undertaking research about assessing the market demand for clean energy financing in Ningbo city, establishing a dedicated financial mechanism for clean energy investments undertaken by SMEs and ESCOs, and structuring PPP in clean energy sector in Ningbo city.
During Project Implementation
Business Opportunities
Consulting Services

The TA will be implemented in two phases. Phase 1 will help the NMG identify strategies, initiatives, and financial products that need to be launched as early actions under the LCDAP. Phase 2 will support (i) policy formulation and the design of institutional arrangements to deliver the financial products identified under phase 1, and (ii) the preparation of PPP transactions in clean energy and capacity strengthening in government agencies, financial institutions, and potential investors toward encouraging private investments in clean energy.

Due to the urgency of finalizing the Ningbo LCDAP, Phase 1 will be implemented by a team of individual consultants to be recruited by ADB and consisting of two international consultants contracted for a total of 6 person-months and four national consultants, also contracted for 6 person-months. For phase 2, ADB will engage a consulting firm to supply two international consultants for a total of 5 person-months and five national consultants for 13 person-months. The TA will be implemented over 18 months, with phase 1 undertaken from 1 July to 31 December 2013 and phase 2 from 1 January to 31 December 2014.

The consultants recruited for phases 1 and 2 will have extensive knowledge and expertise regarding (i) energy efficiency project preparation and due diligence, (ii) distributed renewable energy technologies and implementation models for distributed renewable energy projects, (iii) how to structure PPP projects for renewable energy and energy efficiency investments, (iv) financial regulations governing SME financing in the PRC, and (v) structuring financial products to overcome the barriers faced by ESCOs.

The consulting firm for phase 2 will be engaged using quality- and cost-based selection with a quality cost ratio of 90:10, as the experience and expertise of the consultants in designing innovative financial products is highly relevant to achieving TA objectives. Selection will be based on a simplified technical proposal. Consultant recruitment will accord with ADB Guidelines on the Use of Consultants (2010, as amended from time to time). TA funds will be disbursed in line with the Technical Assistance Disbursement Handbook (2010, as amended from time to time).

Responsible ADB Officer Pradeep Perera
Responsible ADB Department East Asia Department
Responsible ADB Division Energy Division, EARD
Executing Agencies
Ningbo Municipal Government
Wu Bohua, Deputy Division Chief
Development Tower A , No.118 Heji Street,Jiangdong District Zip code: 315040
Concept Clearance 19 Apr 2013
Fact Finding 25 Mar 2013 to 10 May 2013
Approval 21 Jun 2013
Last Review Mission -
Last PDS Update 23 Sep 2015

TA 8388-PRC

Approval Signing Date Effectivity Date Closing
Original Revised Actual
21 Jun 2013 01 Jul 2013 01 Jul 2013 31 Dec 2014 30 Sep 2015 -
Financing Plan/TA Utilization Cumulative Disbursements
ADB Cofinancing Counterpart Total Date Amount
Gov Beneficiaries Project Sponsor Others
500,000.00 0.00 100,000.00 0.00 0.00 0.00 600,000.00 21 Jun 2013 379,349.18

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