Guodian Technology & Environment Co Ltd (GTEC) recently signed a contract with Jiangxi Xinyu Power Plant for what is likely the largest energy performance contract (EPC) project in China.

According to the five-year contract, GTEC will invest about 100 million yuan($14.18 million) on alterations to Xinyu Power Plant's two 200,000 kw power generating units, adding energy saving equipment to cut energy consumption and emissions.

The project is estimated to help Xinyu Power Plant save 70,000 tons of coal and 400 tons of fuel, and cut emissions of more than 170,000 tons of CO2 and 1,200 tons of SO2 annually. Meanwhile, GTEC is expected to make a profit of over 200 million yuan by sharing benefits from the energy saved.

In line with the country's demand for energy savings and emissions reduction, EPC projects provide market-oriented energy-efficiency services that leads to a win-win situation for both energy consumption enterprises and energy management corporations (EMCos).

China aims to cut energy consumption per unit of GDP by 20 percent in the 11th Five-Year Program (2006-2010) period. In April 2006, China launched an energy-saving campaign among 998 enterprises in nine high-energy-consuming industries, such as electric power, steel and iron and cement industries, aiming to save a total of 100 million tons of standard coal from 2006 to 2010.

Shen Longhai, director of the Energy Management Companies Association said a total of 14.6 billion yuan was invested in energy efficiency projects throughout the country in 2007, of which 6.55 billion yuan was on EPC projects.

The EPC mechanism, in which an EMCo provides energy-saving and financial services to an energy consumer, emerged in developed countries in the 1970s. With both technical expertise and financial backing, EMCos bear the risk by investing its own or borrowed funds. It recuperates its investment over a period of time through shared savings with client.

In collaboration with the World Bank and the Global Environment Facility, the Chinese government introduced EPC in 1998. By the end of 2007, EMCA members increased from 59 to 308 companies in 2004, according to Shen.