Re ECF Project: 2014-43

Project Title: Regulatory and Financial Technologies to Increase Incentives for Energy Efficiency Investments

Applicant: Prof. Kwok Leung TSUI, City University of Hong Kong

Total Approved Grant: $494,800

Duration: 1/6/2015 to 30/11/2016

Project Status/Remarks: Project completion to be reviewed by the ECF Research Projects Vetting Subcommittee

Scope:
The purposes of the project are to:

  1. perform a thorough study of the theoretical and practical issues;
  2. review and analyze the proposals for regulatory/financial incentives for energy-efficiency investments that have been made;
  3. review and analyze the experiences that have been gained from regulatory and financing programs and experiments, with particular attention to their relevance to the context of Hong Kong; and
  4. based on this review and analysis, make recommendations for implementable regulatory policies in Hong Kong.

Summary of the Findings/Outcomes:
The study found sound theoretical reasons for utilities to be incentivized to invest in energy efficiency programs. Monitoring and measuring the true energy savings caused by those programs could, however, create major uncertainty and controversy. As a result of this finding, it was not recommended to strongly increase utility shareholder incentives in Hong Kong in their current or similar form. It was suggested that enforcing such incentives by using noncontroversial measures of energy saving might favor entrenched energy-efficiency technologies, and might serve as a retardant to innovation. It was recommended, instead, experimenting with an approach that would lead utilities to regard the energy commodity not as its principal source of revenue, but as a cost to be minimized. This could occur if the utility sells an energy service, such as temperature, humidity, and lighting levels within specified bands, rather than the energy itself. To supply the service, the utility might install and own the required appliances, sensors, and controls at the customer's site.