Current market development of energy performance contracting. A comparative study between Hong Kong and Taiwan
| Pages | 371-395 |
| DOI | https://doi.org/10.1108/JPIF-01-2014-0003 |
| Published date | 01 July 2014 |
| Date | 01 July 2014 |
| Author | Pan Lee,Tsun Ip Lam,Ren Jye Dzeng |
| Subject Matter | Property management & built environment,Real estate & property,Property valuation & finance |
Current market development of
energy performance contracting
A comparative study between
Hong Kong and Taiwan
Pan Lee and Tsun Ip Lam
Department of Building & Real Estate, The Hong Kong Polytechnic University,
Hong Kong, SAR, and
Ren Jye Dzeng
Department of Civil Engineering, National Chiao-Tung University,
Hsin Chu, Taiwan
Abstract
Purpose – The purpose of this paper is to investigate the current market development of Energy
Performance Contracting (EnPC) in Hong Kong and Taiwan, focussing on four key aspects: first, the
potential building energy retrofits as an investment for future savings; second, the motivations for building
owners toward the use of EnPC; third, the reasons for building owners not using EnPC; and fourth, the
different approaches of Hong Kong and Taiwanese governments toward the promotion of EnPC.
Design/methodology/approach – A dual-questionnaire survey was conducted both in Hong Kong
and Taiwan, where the same set of questionnaire was sent to the key personnel of the energy services
companies (ESCOs) in both regions as identified from the latest member lists of representative trade
associations, supplement with 11 structured interviews.
Findings – Apart from explainable differences, the results show thetop rankings by the respondents
of Hong Kong and Taiwan as follows: “Potential retrofit works” including lighting replacement with
efficient fluorescent and light emitting diode lamps and improvement of air-con system. “EnPC
Motivations” including owners’ lack of upfront capital and use of energy savings for other purposes
may yield better returns; ESCOs’ provision of turnkey services. “Reasons not considering EnPC”
including worry about itscomplexities; lack offamiliarity with EnPCand long paybackperiods. Asfor
promotional efforts for EnPC, the Taiwan government has taken more initiatives to foster its use both
technically and financially.
Practical implications – This study identifies market-related motivators and deterrents as
experienced by ESCOs in implementing EnPC projects in two developed Asian economies.
Originality/value – This study provides insightful information for the stakeholders about the latest
market development of EnPC in Hong Kong and Taiwan.
Keywords Hong Kong, Incentives, Taiwan, Deterrents, Energy efficiency investment,
Energy performance contracting
Paper type Research p aper
1. Introduction
Although buildings account for 40 percent of world’s energy use (World Business for
Sustainable Development, 2009), most of the existing buildings are not energy efficient
(Lee et al., 2001). This is often ascribed to equipment oversizing, unrealistic design,
The current issue and full text archive of this journal is available at
www.emeraldinsight.com/1463-578X.htm
Received January 2014
Accepted March 2014
Journal of Property Investment &
Finance
Vol.32 No.4, 2014
pp. 371-395
rEmeraldGroup Publishing Limited
1463-578X
DOI 10.1108/JPIF-01-2014-0003
The work described in this paper was supported by a grant from the General Research Fund of
the Hong Kong SAR Government (Project No.PolyU5188/11E) and the 2013 NCTU Taiwan Elite
Internship Program awarded by the National Chiao Tung University to Pan Lee for a study visit
to Taiwan.
371
Current market
development
of EnPC
poor thermal efficiency, use of ageing equipment and technology (Taylor and World
Bank, 2008). Through an improvement of building insulation, enhancement of building
system and equipment efficiencies, as well as optimization of system operation, a
significant reduction of energy use in existing buildings can be achieved. Other factors,
such as high energy prices, the impending increasesin future energy prices, government
incentives and low interest rates, also enhance an awareness of the value of energy
efficiency investments in existing buildings ( Jackson, 2010).
However, the hesitation of energy efficiency investments in existing buildings is still
observed all over the world. Lack of capital costs and technological know-how are often
the major barriers to implementing energy efficiency projects. To address this problem,
the concept of Energy Performance Contracting (EnPC) was introduced to provide
building owners an alter native for enhancement of building energy efficiency in
existing buildings. According to the Directive 2006/32/EC, the European Parliament
defines EnPC as “a contractual arrangement between the beneficiary and the provider
(normally an ESCO) of an energy efficiency improvement measure, where investments
in that measure are paid for in relation to a contractually agreed level of energy
efficiency improvement” (The European Parliament, 2006). It means that, at the initial
stage, energy service companies (ESCOs) guarantee or share the energy cost savings
with building owners and implement the retrofit project, including design, installation,
construction, measurement and verification (M&V) of savings. Building owners only
make a series of payment to ESCOs when the actual energy cost savings are realized.
In case of shortfall in savings, ESCOs will compensate the losses incurred by building
owners under the contract agreement. Figure 1 illustrates the concept of EnPC model.
The status of development in the EnPC market in the world is relatively diverse.
In the USA, with the strong commitment of the Federal government to enter into the
energy savings performance contracts (The US Depar tment of Energy, 2014a), EnPC
has largely been a successful model to improve the energy efficiency (EE) in
Energy & Operational Costs
Time
End of
equipment life
Contract starts
Baseline
Reduced operating and
maintenance costs due to
retrofitting
Savings used to pay for
project or shared with
building owners & ESCOs
Contract ends
Customer
Savings
Installation Operation
Duration of Program
Figure 1.
The concept of energy
performance contracting
model
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