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Building energy efficiency funding schemes

In its 2009-2010 Budget Speech in February, the Hong Kong Government referred to its promotion of a low carbon economy, highlighting the Environment and Conservation Fund's (ECF) allocation of HK$450 million for private building owners to conduct energy-cum-carbon audits and energy efficiency improvement projects.

The Building Energy Efficiency Funding Schemes, launched in April comprise energy-cum-carbon audit projects, for which HK$150 million has been allocated, and energy efficiency projects, with a budget of HK$300 million.

In this article we outline how these two schemes operate and how private building owners can seek funding to improve energy efficiency.

Energy-cum-carbon audit projects

This scheme encourages existing building owners to apply for funding to carry out energy-cum-carbon audits (ECAs). ECAs will review energy use, quantify greenhouse gas (GHG) emissions and identify opportunities to enhance the energy efficiency of building operations. The scheme covers ECAs of publicly accessible communal areas of residential, commercial or industrial buildings, for example, clubs, car-parks, gyms and property management offices.

Applicants can be either owners' corporations (registered under the Building Management Ordinance) or owners' / residents' organisations. Applications can also be submitted on behalf of consenting applicants by property management companies or qualified service providers. Qualified service providers (QSPs) must be registered professional engineers or members of the Hong Kong Institution of Engineers.

ECAs should be carried out according to the latest editions of the:

• 'Guidelines to account for and report on GHG Emissions and Removals for Buildings (Commercial, Residential and Institutional purposes) in Hong Kong', and
• 'Guidelines on Energy Audit'.

A list of QSPs and the guidelines are available on the www.building-energy-funds.gov.hk website.

Applicants ineligible for this scheme, such as tenant companies or sole owners, can still carry out energy/carbon audits of their premises using the guidelines - which are designed for voluntary self-reporting - although they will not be eligible for any subsidy. (Hong Kong organisations that have voluntarily conducted audits and initiated carbon reduction programmes can be found on the Green Hong Kong Carbon Audit scheme on the Government website, accessible at www.epd.gov.hk).

Applications for funding must be submitted at least four months before the start of the project and the ECA must be carried out within six months of the application's approval. Following completion of the ECA, a submitted audit report must include recommendations or programmes to reduce GHG emissions and improve energy efficiency and conservation of the building. Subsequent progress reports must be submitted annually for three consecutive years following the initial ECA and should include major follow-up actions taken to reduce GHG emissions and improve energy efficiency. All reports must be certified by a QSP.

For applications involving a single building 50% of the approved cost of the ECA and subsequent reporting will be reimbursed, up to a maximum of HK$150,000 per application. While there is currently no maximum cap for applications involving more than one building, reimbursement granted will still only amount to 50% of the costs and it is presumed that shared expenses will help reduce such costs.

Energy efficiency projects

This scheme encourages existing building owners to carry out alterations, additions or improvement works to upgrade the energy efficiency performance of lighting, electrical, air-conditioning and lift and escalator building services installations for communal use in residential, commercial or industrial buildings.

Before applying, applicants should engage a QSP to certify the scope of the project, justify cost effectiveness, supervise and certify completion reports. On completion of the project, fitted installations must comply with or be more energy efficient than the energy efficiency standards in the 2007 edition Building Energy Codes (BECs) issued by the Electrical and Mechanical Services Department.

Eligible applicants for this scheme are the same as for the ECA scheme. To apply for funding, applicants must estimate the costs for procuring, delivering and fitting-out installations but they should absorb recurrent maintenance and operational costs. Applications should be made at least four months before the start of the project and the works should start within 12 months and be completed within 24 months from the date of the application's approval.

Since owners' corporations are already responsible for maintaining their buildings, all other applicants must enter into a term maintenance contract (TMC) for a minimum period of three years, with a building services or electrical and mechanical engineering contractor, to provide preventive and corrective maintenance services to all fitted installations. A certified copy of the signed TMC must be submitted as part of the scheme within six months of the project's completion, unless prior exemption has been granted.

For applications under this scheme 50% of the approved amount spent on energy efficiency projects will also be reimbursed up to a maximum of HK$500,000 per application involving a single building.

Operation

Both schemes will be open for three years or until the allocated funds have been fully utilised.

All applications are administered by the Environment Bureau (ENB) and the Electrical and Mechanical Services Trading Fund. The vetting subcommittee can approve an amount up to HK$2 million for an application under either scheme. Beyond this, recommendations have to be endorsed by the ECF committee. The following broad criteria will be used to assess the merits of individual applications:

• the project's contribution to promoting a low carbon economy
• whether it is non-profit making in nature
• the applicant's technical and project management capability
• whether the proposed project's schedule of implementation is well planned and the proposed budget is reasonable, realistic and cost-effective (or whether there are alternative sources of funding)
• priority will be given to buildings with high potential for energy savings and applications that seek to complement other environmental initiatives, such as carrying out an ECA or other energy audit.

Details of all approved projects, including funding amounts, will be uploaded onto the Government website in due course. As of September 2009 over 800 applications have been received and approximately 60 of these have been approved, with a value of HK$10 million.

Analysis

The Hong Kong Government says that it expects to subsidise 1,600 projects through these schemes. If this is the case, each project will receive an average amount of HK$280,000 to carry out an audit and implement energy efficiency measures. Since this sum is unlikely to make a material difference to large commercial, office or hotel buildings, these schemes are perhaps aimed more at the smaller and residential markets with the purpose of enticing building owners to gain expertise in energy performance issues so that they can better transfer this know-how within the community. Another benefit of these schemes is no doubt to also incentivise and create business opportunities for related sectors, such as companies manufacturing energy efficient appliances.

Both schemes are voluntary with the incentive of funding to encourage participation. However, requirements to audit building emissions and comply with (or exceed) energy performance standards may become mandatory in future. Indeed the Government is presently considering mandatory implementation of the BECs (for new buildings and major renovations in existing buildings) with a view to introducing the legislation into the Legislative Council by the end of 2009.

With Hong Kong buildings accounting for 89% of electricity consumed in Hong Kong there is real scope for the building sector to be a big part of Hong Kong's climate change solution, encouraged by the introduction of these schemes and their incentives. The extent to which the Government will continue to use voluntary incentives or introduce statutory requirements to reduce emissions remains to be seen. The likely prospect is that it will adopt a mixture of both. There is also the question of market demand within the private sector and the influence that international, corporate tenants with sophisticated CSR policies may have on ensuring the prominence of green buildings, at a rate which may ultimately surpass the Government's progress on this issue.