ANALYSIS OF ECONOMIC INCENTIVE POLICIES... 55An EPC allows professional energy service companies to participate
in the energy management of green buildings for a profit. In brief, the
EPC constitutes a collaborative effort between professional energy
service companies and developers that is designed to reduce techno-
logical and financial risks during green building development (Lu and
Fan 2012 ). Typically, energy service companies invest in energy-saving
equipment and technologies and secure profits from energy savings
made during the building operation phase to pay back investments.
In other words, a portion of the incremental costs can be managed
by energy service companies rather than by developers. In addition
to partly sharing incremental costs, more importantly, companies can
engage professional support for energy savings at the design, technol-
ogy selection, and equipment operation and maintenance phases of the
operation stage. Thus, the EPC may significantly reduce the risks fac-
ing developers by allowing professional companies to become involved.
More importantly, developers and energy service companies can form
contracts based on market principles.
Based on the description presented above, the EPC may serve as a
means to overcome the problems and barriers associated with China’s
current subsidy procedures. However, we found that no EPCs had been
created among the 104 green building projects examined and that there
were only a few cases of EPC implementation in Chinese green building
projects. The two main obstacles appear to be as follows (Sun 2008 ; Wang
et al. 2008 ):
- EPCs still constitute an emerging energy management approach in
China. Limited regulations and implementation experiences consti-
tute the most significant barriers thus far. Professional energy service
companies are not afforded sufficiently supportive government poli-
cies (such as tax exemptions for green building involvement). - The financial risks faced by energy service companies differ from
those faced by green building developers. Most energy service com-
panies have been established only in recent years, and enterprise
credit evaluation systems created by banks for these companies have
not yet been fully formed, which makes it difficult for these compa-
nies to obtain credit guarantees from banks. Furthermore, most of
these companies are small Chinese businesses, making it more dif-
ficult for them to obtain business support from banks.