Supporting Low-carbon City Development in Shanghai

Challenge

Cities accounted for 85 percent of China's commercial energy use, and their importance was set to increase with rapid urbanization. It was estimated that over the coming two decades energy demand and related carbon emissions from buildings and appliances would triple and emissions from transport would more than quadruple with the expected ten-fold increase in the vehicle fleet.

The speed and scale of urbanization provided an unprecedented opportunity to invest in clean energy and energy efficient technologies in buildings to contain emissions related to energy supply and consumption. Introducing efficient low-carbon technologies into new urban infrastructure today would avoid locking cities into a high-carbon growth path for decades to come.

In Shanghai, consumption-related greenhouse gas emissions per person were relatively high by national and international standards. Priorities of Shanghai's 12^th Five-Year Plan for Energy Conservation and Climate Change included strengthening energy-saving monitoring and management systems, accelerating the development of energy-saving and low-carbon transportation, and promoting low-carbon buildings.

Changning District, a well-established commercial and residential urban area in Shanghai, had a population of about 600,000. With almost no industry, buildings were estimated to contribute as much as 90 percent of total final energy consumption in Changning. A World Bank-supported study showed that there was huge technical potential in rehabilitating the existing building stock to reduce energy consumption, but institutional and financial barriers existed.

Approach

The World Bank-financed Green Energy for Low-Carbon City in Shanghai Project was designed to pilot green energy schemes and scale up low-carbon investments in buildings in Shanghai, with a focus on Changning district. Green energy scheme refers to a policy, financing mechanism, business model, technology application, or infrastructure program leading to reduced energy consumption and reduced use of high-carbon energy. Schemes that were proved successful in Changning could be replicated in other districts in Shanghai as well as in other cities.

Two parallel tracks were considered in the project design and implementation. First, a grant from the Global Environment Facility (GEF) would support policies to overcome barriers and increase market demand, while providing technical assistance to pilot green energy schemes including innovative policies, near-zero emission (NZE) building, innovative financing mechanisms and non-motorized transport (NMT). Second, the World Bank loan would leverage co-financing from two participating financial intermediaries, the Shanghai Pudong Development Bank (SPDB) and the Bank of Shanghai (BOS). Each would finance investments in energy efficiency and low-carbon distributed energy resources, matching the amount of the World Bank loan allocation for low-carbon investments.

The bulk of project activities would be in the building sector, with a focus on building retrofits as the leading measure to reduce emissions in Changning. The project would scale up low-carbon building investments using a combination of technologies ranging from improved new and existing building lighting, heating, ventilation and air conditioning systems and insulation, to energy management systems and low-carbon distributed generation systems.

Replicating outcomes from Changning to Shanghai could result in substantial energy savings over the 20-year lifetime of investments. Reducing emissions in this way would contribute to China’s broader agenda of low-carbon city development, green growth, and addressing climate change.

Solar panels on the roofs of the Shanghai Mart. Photo credit: Urban Regeneration and Low-Carbon Project Management Center, Changning District, Shanghai

Results

The Green Energy for Low-carbon City in Shanghai Project was implemented between 2013- 2018, and achieved the following results:

• Informing two policies issued by the Changning District Government in 2018: “Low-Carbon Development Special Funds Management Measures” and “Public Building Energy Efficiency Benchmarking Management Measures.” The latter is considered a breakthrough as it is the first “mandatory policy” for public building energy performance benchmarking in Shanghai.
• Improving Changning District’s online building energy platform’s functions to assess, manage, monitor and verify energy performance and efficiency opportunities. The platform now covers 187 public buildings or over 90 percent of the major public buildings in Changning. The platform helps public building managers identify opportunities to optimize system operation and maintenance and to verify the effect of measures taken from day to day and year to year. It also allows policymakers and regulators to monitor and verify energy performance of buildings for participation in Changning’s innovative subsidy and benchmarking programs. The platform was replicated in other districts in Shanghai, followed by a municipal level platform to monitor the building energy consumption in Shanghai. It serves as a role model for the development of similar platforms in Shanghai and even nationwide.
• Demonstrating the viability of an NZE building retrofit. The project pioneered holistic processes to design, construct and operate the retrofit of Hongqiao State Guest Hotel Building 9 to NZE  standard, winning the acclaim of national and international governments and private sector bodies. It was selected by the National Development and Reform Commission as one of the Top Ten Energy Best Practices in the building sector in China and also by the G20 as among the Top Ten Energy Efficiency Best Available Technologies and Best Practices. The whole process management approach was replicated for a new building at another location with even better performance and at much lower cost.
• Supporting innovative distributed energy resources systems and low-carbon community planning, including heat and power generation systems, distributed photovoltaics, and non-motorized transport areas.
• A total of 67 building retrofit subprojects, including government buildings, office buildings, shopping malls, hotels, and hospitals, are now saving energy equivalent to over 78,083 tons of coal equivalent annually, with an associated 189,946 tons less carbon dioxide emitted a year, compared to what was expected without the project. The Disney International Tourism and Resort Zone Energy Station was the largest subproject. By using natural gas for cooling, heating, electricity, hot water and compressed air with a system efficiency of 83 percent, it accounted for nearly one third of annual emissions reduction measured under the project.
• The project contributed to Changning’s efforts to achieve its target of reducing carbon intensity by 15 percent between 2016 to 2020.

Bank Group Contribution

The International Bank for Reconstruction and Development (IBRD) provided a loan of US$100 million in 2013. The Bank team closely coordinated with other ongoing and planned low-carbon initiatives and building energy efficiency programs, both at the national and municipal levels in China. The project design was built on lessons drawn from international and Chinese experience

of low-carbon cities and building energy efficiency and renewable energy programs. Three upstream analytical and advisory activities provided a solid foundation for the design including: greenhouse gas marginal abatement cost curves and scenarios; performance-based energy efficiency benchmarks and policies for building retrofit; and incremental costs of low-emission and NZE new buildings.

Partners

The Global Environment Facility (GEF) provided a grant of $4,345,000 for technical assistance and capacity building.

The IBRD loan leveraged co-financing of $116.93 million from two participating financial intermediaries, the Shanghai Pudong Development Bank (SPDB) and Bank of Shanghai (BOS), and $115.40 million from project developers.

In project preparation, the World Bank team worked closely with the International Finance Corporation team to explore potential joint investment programs.

During project implementation, the World Bank team enjoyed strong support from local government leaders, who ensured effective inter-agency coordination and smooth implementation.

Technical design of a pilot distributed generation center in Changning District received complementary funding by the Energy Foundation, another development partner of the District Government.

Moving Forward

The green energy schemes piloted in Changning were promoted through 18 high-level meetings, workshops, conferences, and conventions in Shanghai and beyond, including the meeting of the C40 Cities Climate Leadership Group in Copenhagen, Denmark. The NZE demonstration building at Hongqiao State Guest Hotel has attracted the attention of Chinese and international leaders including the Prime Minister of Norway. Overall, the various green energy schemes successfully piloted under the project have high potential for further replication in other parts of China.

Based on the studies and experience gained from the project, Changning District has been using energy efficiency benchmarking to rank office buildings since 2017 and has also developed a new incentive system as part of its continued efforts to improve energy efficiency of existing public buildings.

The project’s successes and lessons were the subject of a policy brief prepared by the University of Leeds in partnership with the Coalition for Urban Transitions, a major international initiative to support decisionmakers to meet the objective of unlocking the power of cities for enhanced national economic, social and environmental performance, including reducing the risk of climate change.

Beneficiaries

“Over the last five years, we have completed retrofitting of existing public buildings with a total floor space of nearly three million square meters.  While reducing carbon emission and improving energy efficiency, we have explored ways to integrate low carbon with urban regeneration and use low carbon to boost regional economy. For Changning, low-carbon and sustainable development is not only a concept but has become a character of our district.”

-  Yuan Xiangqing, Director, Function Expansion Office of Hongqiao and Zhongshan Park Area of Changning District