Existing Building Retrofit and Heat Metering Reform

The building area in urban northern China increased from less than 3 billion m² in 1996 to over 8.8 billion m² in 2008. Due to government’s energy efficient efforts, including a much higher energy efficiency for new buildings, the average energy consumption by heating in this region had decreased from 24.3 kgce/(m²·a) in 1996 to 17.4 kgce/(m²·a)in 2008 (THUBERC 2011).
The energy consumption from winter heating in North China is currently more than 150 million tce per year, representing over 50% of the building energy consumption. Moreover, the indoor thermal comfort is poor and heating is very inefficient. The billing of heating costs is mostly based on the heating area and not the consumption based on actual need.

The aim of this general policy set is to improve the energy efficiency of existing residential buildings by introducing the heat metering and energy-efficient retrofitting as well as the heat pricing system reform. In detail:
Policy 1: It specifies the target groups for gaining the subsidy: energy-efficient building envelope, installation of heat meters and temperature control equipment, retrofitting of heat generation and heat supply network, and other measures related to heat metering and energy-efficient retrofitting. Besides, it also provides the rewarding principles and detailed calculation method, instalment and subsidy use, as well as supervision and management requirements.
Policy 2: It formulates the overall implementation strategy of energy-efficient retrofitting and heat metering reform. Firstly, it stresses the work principle and targets for the heat metering and energy-efficient retrofitting work for each province and city in North China. Secondly, it lists concrete tasks to be done to achieve the targets, including investigating current energy consumption, formulating implementation plans for the reform, retrofit implementation, improving ex-post evaluation, and summarizing and disseminating lessons learnt. Finally, it also specifies the supporting measures needed for the reform, such as institutional reform, pursuing multiple financing sources and developing a market mechanism, improving organisational structure, formulating technical standards.
Policy 3: It provides a technical guide for heat metering and energy-efficient retrofitting for existing residential buildings in the heating areas in North China. The contents of the guide include building energy efficiency diagnosis, basic principle of building energy efficiency retrofitting, retrofitting regulations, and methods of achieving the energy efficient building envelope. Heating system retrofitting, heat metering and the testing and evaluation of retrofitting results is also included.
Policy 4: It directs the assessment of heat metering and energy-efficient retrofitting projects, including the reference, condition, scope, and procedure of accepting the projects.
Policy 5: MOHURD, NDRC, MOF and AQSIQ are jointly responsible for releasing Policy 5 to promote heat metering reform. Seven tasks were specified in this policy: (1) to widely promote heat metering prices and charges based on consumption; (2) to improve the supervision of heat metering installation in new building; (3) to finish the target of 150 million m² existing residential building retrofitting work set by State Council; (4) to reinforce the responsibility of the heat supply company; (5) to complete the heat metering technology system; (6) to strengthen the quality supervision and inspection of the heat metering products; (7) to strengthen the management for energy efficiency of the heat supply network.
Policy 6: To ensure the accomplishment of the target for the 11th Five-Year period as set in Policy 1 by the end of 2010, MOHURD and MOF released Policy 6 at the beginning of 2010 to push progress by specifying the work requirements of existing building retrofitting for the local construction and financial bureaus: so as to ensure the accomplishment of the rest of the retrofitting work in 2010 with good quality, and to conclude the retrofitting mode by the 12th Five-year period, etc.

It is a national policy with regional focus.

Relevant sectors

• Residential: dfjasldkfjas

The retrofitting work focuses on the following three areas:

1. Heat metering and temperature control equipment: ‘installation of heat meters in boiler and heat stations; meter installation in the entrance of the heating network of a building or of a building group (if the buildings have very similar characteristics); and method development for disaggregating the heat use of each dwelling’.
2. Retrofitting the heat supply network for heat balance: ‘energy-efficient improvement for heat supply, such as boilers and heating substations; retrofitting the heat network and installing hydraulic balance valves if needed; and installation of thermostat valves and regulating valves with an automatic temperature control function together with pipe system replacement to improve the indoor heating system’.
3. Energy-efficient retrofitting of building envelope: ‘exterior windows, walls, and roofs with measures such as double-glazed windows, window frame sealing, more efficient windows, external insulation of the walls, and direct inverted roof insulation.’ In accordance with the specifications of the accounting method, U-values of components must meet the local energy-saving design standards.

(Source: Zhou et al., 2011)

Relevant target groups

• Investor
• Investor-occupier
• Tenant
• User
• Governmental actor

Direct beneficiaries

• Investor-occupier

  They benefit from the saved cost and improved thermal comfort

• Tenant

  They benefit from the saved cost and improved thermal comfort

Indirect beneficiaries

• Construction company

  They benefit from the demand of construction work for energy efficiency retrofitting

• Installation contractor

  They benefit from the demand of installation work for energy efficiency retrofitting

• Manufacturer

  Manufacturers benefit from the demand of various components and meters energy efficiency retrofitting

• Investor

  Investors benefit from increased building value

• Energy consultant

  They benefit from the demand of energy and engineering advices for energy efficiency retrofitting

• Engineering consultant

  They benefit from the demand of energy and engineering advices for energy efficiency retrofitting

Relevant barriers

• Knowledge and information barriers: The policy set addresses lack of information by actors (such as local government developers, designers and engineers, consultants) on saving target, implementation strategy, technical measures, way of applying for central financial subsidy.
• Economic and financial barriers: This policy set addresses the lack of access to financing / lack of capitals for retrofitting projects by actors such as investors and local government (Policy 1)

Relevant incentives

• Saved energy costs: Investor-occupiers can benefit from saved energy costs

This policy set focuses on retrofitting of existing residential buildings in North China. Policy set 1 (mandatory building energy code), policy set 3 (volunteer building energy label) and policy set 4 (volunteer green building label) also apply to the retrofitting projects.
In addition, the industry standard ‘Technical specification for heat metering of the district heating system’ (JGJ 173-2009) was one of the bases for Policy 4.

The policy set includes innovative instruments/elements.

1. Setting the quantitative targets in retrofitting for each provincial government in Northern China.
2. Providing the subsidy based on criteria such as the focus of reform, the effect of retrofitting, and retrofitting progress to guide the retrofitting work well. 

Along with the development of technology in the field of building energy efficiency and heat metering, the methods of subsidy distribution and acceptance checking should be updated, such as the ‘weighting’ allocated to retrofitting focus, progress coefficient.
More support should be given to the development of energy performance contracting (EPC).

The following pre-conditions are necessary to implement this policy type

Agencies or other actors responsible for implementation
The policy set assigned tasks to a number of existing agencies: Local construction administrative departments, building energy efficiency consulting organizations, construction contractors, building research institutes, heating supply companies etc.

Funding
Subsidies can be very helpful for implementing energy efficiency retrofitting work. Policy 1 provides the rewards leading the whole energy efficiency retrofitting work in the North China heating area . Other than the incentives from the central government, provincial governments are also required to release provincial subsidies.

Test procedures
The calculation of the energy performance for the building or its components follows the same test procedures as specified in China’s Regulations for Energy efficiency of building design and operation in new and refurbished buildings (cf. the bigEE China file on these).

Other pre-conditions
A process for ensuring compliance
In addition, according to the process for ensuring compliance, building energy efficiency retrofitting projects follow the same regulation as new building projects: the examination organizations strictly examine the retrofit design documents in accordance with the standards. The carrying out of the retrofitting project will only be given permission after all components in the design are qualified.
Every year the local construction bureaus examine the implementation of building energy efficiency measures during their inspection of building projects, existing building retrofitting and heat metering reform are part of them. Thereafter, MOHURD will select some local projects for annual national inspection based on the local construction bureaus’ report. The regions and cities with problems will be targeted in particular.

Policy design process includes the pre-study of energy consumption by existing residential buildings in North China, stakeholder consultation about living quality and heating behaviour, expert consulting, and discussion about policy details among different administrative departments at a central level.Policy 1 and Policy 2 released by MOF and MOHURD provides funding to provincial governments based on the agreed work load for retrofitting. The provincial governments then allocate the funds on a project basis. Other key steps consist of drafting the implementation plan, implementing the retrofit, process supervision and ex-post evaluation.The actions of the local government as required by central government include:

1. Investigating the current situation to confirm the retrofit projects: collecting public opinions by household interview, questionnaire, meeting with the resident delegates, serving as foundation for publicity works and financing policy designing; evaluating the project’s condition; integrated with other building repair and district retrofit projects. Before implementing the policy at local level, a detailed investigation of the existing residential buildings should be conducted, serving as an important basis for making retrofitting plans, budget analysis, calculating energy saving potentials etc. The investigation should cover both average buildings and typical buildings, including the basic building data of average buildings and detailed information (like building envelope, window type, heating situation etc.) of typical buildings. Since the retrofitting work will influence the residents’ normal life, and it also needs their participation and financial support, another important social pre-condition is acceptance by residents. Thus, it is very important to communicate with the residents at the beginning of the project, to find out the residents’ needs, disseminate building energy efficiency information, invite them to take part in the retrofitting plan discussion, and teach them how to use the energy efficiency devices well etc. 
2. Drafting the implementation plan, list of projects, detailed project information and submitting to MOHURD;
3. Implementing the retrofit: except for the specific retrofitting focuses mentioned in the ‘technological focus’ section , the prerequisite step is to select a proper financing channel, such as investment by a heat supply company, by an energy service company, by the single owner of the building, by residents themselves, by international co-operation programmes or by investors in whole building complexes. 
4. Process supervision and ex-post evaluation: all retrofitting process has to be recorded by local governments. The result should be evaluated by energy efficiency evaluation organizations designated by local government and submitted to MOHURD and MOF, who then choose random sample projects in each province for re-evaluation.

The final allocation of the central subsidy depends on:

1. The scope of reform: the weightings of 3 retrofitting focuses are: energy-efficiency retrofit of building envelop (60%), heat metering and temperature control equipment (30%), retrofitting the heat supply network for heat balance (10%). 
2. The effect of energy efficiency retrofitting: energy saving after vs. before the retrofitting 
3. Progress coefficient: this is divided into 3 levels of coefficient - 1.2 for those that accomplished the task before the 2009 heating period, 1.0 for those before 2010 and 0.8 for those before 2011.

Quantified target
The target installed in this policy set for the retrofitting was a floor area of 150 million m² in order to save 16 million tce primary energy during the 11th 5-year period.
The goal was to realize 50% of heating intensity reduction after the retrofitting compared to buildings built in the 1980s and an additional 20% reduction through the heating supply reform by the end of 2010. Since the baseline heating intensity of the existing buildings used is 25 kgce/m², this implies savings of 12.5 kgce/m² after the retrofits as well as savings of 5 kgce/m² after the heating supply reform. This target can be further broken down to an estimated saving of 2 Mtce/year from retrofits for the 150 million m² and another 14 Mtce/year from the heat supply reform including the heat pricing reform for the 2.7 billion m² of urban buildings that have district heating systems (Zhou, et al., 2011).
The retrofitting target for the 12th five-year period is 400 million m², which will result in an improvement of heating and living condition for about 7 million households. The cumulative target is 1.2 billion m² by the end of 2020.

Actors responsible for design
Policy 1: MOF
Policy 2, 3, 4: MOHURD
Policy 5: MOHURD, NDRC, MOF and AQSIQ
Policy 6: MOHURD, MOF

Actors responsible for implementation
Local construction bureau, financial bureau, Development and Reform Commission, and bureau of quality supervision, inspection and quarantine; building owner, engineering companies, etc.

Monitoring
The progress of heating metering and energy-efficient retrofitting projects for existing residential buildings in heating areas in North China are important areas in the annual inspection by MOHURD.
For example, in the ‘circular of annual inspection for building sector energy efficiency and emission reduction in 2011 by MOHURD’ released on Nov. 28, 2011, the following aspects of existing building retrofitting are required for inspection :

1. Progress to implement the related policies, like Policy 4, and tasks assigned in latest working meeting (MOF, MOHURD, 2011) held on Sep. 28, 2011. The tasks involve monitoring the installation of the heating metering system, implementation of quantity-based charge scheme in the North China heating area, the situation of conducting energy statistics and energy quota management, the situation of conducting energy efficiency and metering retrofitting for the old heat supply system and existing building during the 12th Five-Year period.
2. Progress to implement the mandatory items of heat metering in policies such as ‘Technical specification for heat metering of district heating systems’ (JGJ 173-2009). The specific inspection work focuses on the heat meter installation and temperature control device installation in new building and existing building retrofitting.
3. Implementation status of ‘Interim Management Measures of Urban Heating Price’ (NDRC Price [2007] No.1195) released by MOHURD and NDRC in 2007. The policy promotes a two-stage pricing system (fixed price plus the quantity-based charge according to the actual heat consumption). However, for buildings that do not fulfil structural conditions for the two-stage price system, an area-based charge system can still be used. 
4. Implementation status of ‘Management Measures of Heat Supply Measurement for Civil Buildings’ (MOHURD [2008]No.106). The data being inspected is: heat meter installation by heating supplier and the percentage of residential building area charged according to actual heat consumption in the total central-heating residential building area.

Evaluation
From 2006 to the end of heating period in 2009, the cumulative floor areas installing heat meters was 360 million m², as 5% of the total area of central-heating building in urban North China. The area charged according to actual heat consumption was 150 million m² (Baoxing 2010).
According to the annual inspection by MOHURD, until the end of 2010, the retrofitted projects of 182 million m² in 15 provinces and cities in the North China heating area achieved energy savings of two Mtce per year and CO₂ emission reduction of 5.2 million tonnes, SO₂ emission reduction of 400,000 tonnes, which reached beyond the initial target set in 2007 (150 million m²).

• Dynamic market transformation and/or innovation: The aim of this general policy set is to improve the energy efficiency of existing residential buildings by introducing the heat metering and energy-efficient retrofitting as well as the heat pricing system reform. It aims at dynamic market transformation for energy efficiency retrofitting of the existing residential buildings in the North China heating area.
• Avoiding lost opportunities: By stimulating the retrofitting of a large number of existing buildings, the policy avoids continued waste of energy, or worse, a refurbishment without energy efficiency improvement. However, if the building retrofitting could reach higher cost effective energy savings than the targets allocated to it, this would result in opportunities that are still lost.
• Minimising rebound effects: The policy is not designed to avoid rebound effects. In fact, there are large rebound effects, as many residents take only a part of the impact of the energy efficiency improvement to improve their thermal comfort—and hence living conditions—instead of saving more energy. The average indoor temperature of the retrofitted projects increased by 3-6℃, and some of them increased by more than 10℃ (MOHURD, 2010). This is a co-benefit of the thermal retrofit policy.
• Minimising snap-back effects: With the technical measures of thermal insulation and improved heating systems, there is no snap-back effect to be expected. However, with the heat metering and billing and maybe also the improvement of heating system operation, snap-back may occur. We are not aware of special counter-measures taken in this policy set.
• Minimising free-rider effects: Due to the many barriers e.g. from lack of awareness and skills to lack of finance, it is unlikely that the comprehensive retrofits would have happened without the policy set, so free-rider effects should not be an issue here.
• Creating Spill-over effects: The policy set encourages the development of various financial marketing mechanisms Thus, the retrofitting work can be conducted without the central financial subsidy in the future.

Co-benefits
Many residents take a part of the impact in the energy efficiency improvement to improve their thermal comfort—and hence living conditions and possibly their health—instead of saving more energy. The average indoor temperature of the retrofitted projects increased by 3-6℃, and some of them increased by more than 10℃. This is a co-benefit of the thermal retrofit policy.

The following barriers have been experienced during the implementation of the policy

1. The progress of heating metering and price reform is relatively slow. According to the annual inspection report for building energy efficiency and emission reduction by MOHURD in 2011, only one third of the cities in North China have issued the heat metering and pricing regulation. At least 30% of buildings have not yet realised a heat quantity-based charge after the energy efficiency retrofitting. 
2. The governmental agency responsible for the heating supply companies is separated from that responsible for energy-efficient retrofitting of buildings. The financial incentive is only provided to the governmental agency responsible for building retrofitting.
3. Lack of a reasonable and feasible financing channel for owners as well as an economic model for heating supply companies. These companies, which are key players in this activity, generally lack enthusiasm since the retrofit will increase their costs without necessarily increasing income. The method of reimbursing companies for the cost of heat does not take into account the cost of the investment of the end use equipment necessary for the heat metering retrofit. Because of the relatively long payback period for such projects, it is difficult for companies to make the retrofit investments (Zhou et al. 2011).

The following measures have been undertaken to overcome the barriers
In a national-wide circular about existing building retrofitting in North China issued by MOHURD and MOF in 2011, it stated that multiple-sourced financing measures should be developed. With the exception of the government subsidy, energy performance contracting and other social financial investments should be identified further.

The target years are 2010, 2015 and 2020

Concrete figures in energy savings/year
The target for the policy during the 11th five-year period to the end of 2010 can be broken down to an estimated saving of 2 Mtce/year from retrofits for the 150 million m² and another 14 Mtce/year from the heat supply reform including the heat pricing reform for the 2.7 billion m² of urban buildings that have district heating systems (Zhou, et al., 2011).
To push the existing building retrofitting in the 12th five-year period, MOHURD and MOF held the ‘working meeting of heating metering and energy-efficient retrofit for existing residential buildings in heating areas in North China’ on June 9, 2011. It has been confirmed that the retrofitting target for the 12th five-year period is 400 million m², which will result in an improvement of heating and living conditions for about 7 million households. The cumulative target is 1.2 billion m² by the end of 2020. In addition, in this meeting, MOHURD and MOF allocated subsidy to Beijing, Tianjin, Jilin, Inner Mongolia, and Shandong based on agreed retrofitting targets.

The target years are 2007 and 2011.

Concrete figures in energy savings/year
In 2009, about 69.84 million m² of building area was retrofitted, realizing primary energy savings of 750,000 tce per year and CO₂ reduction of 2 million tonnes. The indoor temperature of the retrofitted projects increased by 3-6℃, and some of them increased by more than 10℃ (MOHURD, 2010).
In 2010, about 86.23 million m² of existing building area was retrofitted (MOHURD, 2011).
The project has only been implemented from 2008, so the sum of the areas retrofitted from 2008 to 2010 (182 million m²) represents the cumulative number for the entire 11th five-year plan. MOF (2012) states that, from 2007 to date, the finished retrofitting area is 310 million m², resulting in energy saving of 10 kgce/m² per heating period.

Achieved additional, yearly energy savings in kWh/year
An energy saving of 10 kgce/m² per heating period is around 40 % of the pre-retrofit heating energy consumption, which averages 25 kgce/m² per heating period.

According to the annual inspection by MOHURD, up to the end of 2010, the retrofitted projects of 182 million m² in 15 provinces and cities in the North China heating area achieved energy savings of two Mtce per year and CO₂ emission reduction of 5.2 million tonnes, SO2 emission reductions of 400,000 tonnes, which reached beyond the initial target set in 2007 (150 million m²). Still, this is only around 6 % of the pre-1997 residential building stock in the target area. If the 2020 target of 1.2 billion m² of retrofitted buildings is met, this will be around 40 % of these older buildings which exist today.
According to the presentation of Minister Qiu of MOHURD in the working meeting in Sep. 28, 2011, by the end of 2010, 80 cities had released policies on quantity-based heat pricing, which have been implemented on 317 million m² floor area.

If it is energy efficiency service, such as Energy Performance Contracting: how many % of energy savings have been achieved on average of all projects?

The incentive is 55 RMB/m² for energy-efficient retrofitting in the severe cold zone and 45 RMB/m² for retrofitting in the cold zone.
This is about 15 to 20 % of the total retrofitting cost, taking the Sino-German ‘China Existing BEE Retrofit’ Co-operation Project as an example. The investment, including repair and energy efficient cost, in this pilot project was 287 Yuan/m², with contributions by the government, GIZ, heat supply company and the residents being 52%, 25%, 17% and 6% respectively. The energy savings of two buildings in this project were 40.4% and 38.2%.
Approximately 10% of the subsidy (6 RMB/m²) was initially given to the provincial government. The remainder was provided after the assessment of the actual energy-saving at the end of the year.
MOF (2012) states that, from 2007 to date, central government has provided 18 billion RMB for the energy efficiency retrofitting of existing residential buildings in 15 provinces and cities and the Xinjiang Production and Construction Corps.

According to the annual inspection by MOHURD in 2009, the average household heating cost was estimated by MOHURD to decrease more than 10% after implementing quantity-based heat pricing.
As stated above, for the retrofitted buildings, average energy savings are 40 % or 10 kg tce/m²/year.
In both cases, energy cost savings vary between different cities, and no overall average data is available.

Central government has provided 18 billion RMB for energy efficiency retrofitting of existing residential buildings in 15 provinces and cities and the Xinjiang Production and Construction Corps from 2007 to date. The finished retrofitting area is 310 million m², resulting in energy savings of 10 kgce/m² per heating period. Thus, the total energy saving of existing building energy efficiency retrofitting in North China is 3.1 billion kgce per heating period. The policy is regarded to be cost-effective.