During 2000−2010, the People’s Republic of China (PRC) experienced double-digit economic growth and equally rapid growth in energy demand. Primary energy demand grew more than 110%, with carbon-intensive coal as the dominant source. The government recognized the challenges associated with its energy use patterns and committed to reduce carbon intensity, primarily through energy efficiency improvements in key energy-intensive enterprises and industries. Therefore, it launched the “1,000 Key Enterprises Program,” which initially targeted the 1,000 most energy-intensive enterprises and later expanded to cover 16,000 enterprises in the nine energy-intensive industries: iron and steel, nonferrous metal, coal, power generation, petrochemicals, chemicals, building materials, textiles, and pulp and paper.
Hebei, which ranked second in total national energy consumption at project appraisal, with an energy intensity significantly higher than the national average, drew urgent attention. The province’s high energy consumption and intensity mainly stemmed from the presence of many energy-intensive industries, most of which operated at much lower energy efficiency levels than international and national best practices because of underinvestment in energy efficiency.
Against this backdrop, the Asian Development Bank (ADB) approved a $100 million loan for the Hebei Energy Efficiency Improvement and Emission Reduction Project in December 2011. The project was to (i) increase investment in energy efficiency in key energy intensive industries in Hebei; (ii) promote energy service companies (ESCOs); and (iii) enhance provincial capacity to identify, finance, and manage similar energy efficiency and emission reduction projects. Its design entailed the participation of a financial intermediary to onlend loan proceeds for energy efficiency investments in the industrial sector, at terms consistent with the prevailing commercial banking practices.
The project’s envisaged impact was improved energy efficiency and emission reduction in Hebei. Its expected outcome was increased investments and enhanced capacity to improve energy efficiency in the province’s industrial sector. A complementary grant from the Global Environment Facility (GEF) it administers was also approved by ADB in October 2013 to address broader capacity issues in the government institutions, commercial banking sector, and third-party monitoring/verification agencies.
Nine industrial energy efficiency subprojects with high potential for energy saving and carbon emission reduction were targeted for the first batch of financing; but one of these subprojects withdrew from the project. Seven of the eight remaining subprojects were completed by 2016, and the last one in 2017. In 2017, this first batch of subprojects were achieving aggregated annual energy savings of 283,397 tons of coal equivalent (tce) and annual emission reductions of 797,568 tons of carbon dioxide (tCO2) and 5,299 tons of sulfur dioxide (tSO2), as validated by a third-party measurement and verification agency. These figures significantly exceeded targets. However, one subproject (Hebei Qianjin Iron and Steel Group Co., Ltd.) was shut down in 2017 after three years of operation because of national policy changes, and two other subprojects were not fully operational after loan closing because of technical constraints.
Provision of solar water heaters and installation services through an ESCO realized annual energy savings of 22,363 tce and annual emission reductions of 65,578 tCO2 and 626 tSO2. However, the project’s target for scaling up the ESCO industry in Hebei was limited because it was a new concept and the ESCO market remained underdeveloped. Accordingly, there were no additional ESCO subprojects in the second and third batch subprojects, which confirmed that policy and regulations and enabling a sound market environment would be required for ESCO business development.
Training and knowledge dissemination activities on efficiency technologies were conducted. A feasibility study for the technical transformation of an ultra-high-pressure blast furnace was completed, resulting in the company recipient achieving energy savings of 108,929 tce from increased efficiency. Four subprojects in the second batch used new industrial energy saving technologies based on this feasibility study.
A pilot to demonstrate smart grid technologies’ potential to achieve energy and electricity savings and manage peak loads through demand side management (DSM) was successfully implemented in Tangshan city. The successful pilot, which entailed connecting 5,700 new monitoring points at 14 substation enterprises and installing sensors for monitoring energy consumption, provided information that served as basis for the development of provincial DSM regulations. Central government agencies have recognized this achievement for its forward-looking configuration and operability.
The highly successful project had the Hebei provincial government (HPG) as the executing agency. A project management office established within the HPG served as implementing agency.
