EMC can't solve the LED lighting industry problem fundamentally

Although China's LED lighting industry has a strong development momentum, the industry still has problems such as lack of core technologies, insufficient innovation capabilities, and disorderly market competition. The biggest reason for the thermal industry to encounter the cold market is that LED lighting does not save energy, and the high cost has discouraged many enterprises and individuals who have demand for LED lighting. Is there a model that can save energy and save money? Can the contract energy management model (EMC) play a role in promoting the LED lighting industry? In this interview, our reporter found that in the process of promotion, financing Difficult and vicious competitions have gradually emerged. How to solve these problems?

Energy Management Contracting (EMC) is a new energy-saving mechanism that emerged in developed countries in the 1970s. It is essentially an energy-saving investment method that uses reduced energy costs to cover the full cost of energy-saving projects. This model allows users to upgrade their plants and equipment with future energy savings, reducing current operating costs and improving energy efficiency.

It takes tens of thousands of yuan to replace the street lights, and the government is very weak.

EMC mode has a happy LED

The initial integration of LED lighting and contract energy management began with the national “Ten Cities and Ten Thousand Miles” pilot project. At that time, it took tens of millions of dollars to replace only a part of the street lights in a city. No government or municipal department was willing and able to spend so much money to experiment. In this case, the advantages of the EMC model are reflected. Under this model, the professional energy-saving technology service company accepts the entrustment of customers (energy-saving owner enterprises), signs energy service contracts with customers, implements energy-saving projects with their own funds, and provides customers with equipment, technology and funds necessary for energy-saving transformation. Services and gains from the energy costs saved for customers. This method solves the problem of large investment and high risk of LED street lamp demonstration project, and also guarantees the maximization of benefits, minimized risks of production, consumption and finance, and achieves a win-win situation of “government, enterprise and public”.

Since then, in the process of adopting the EMC model for LED lighting projects, the state and local governments have also adopted active support and encouragement policies.

However, with the in-depth development of the “Ten Cities and Ten Thousand Miles” project, many problems have also been highlighted: some LED street lamp manufacturers have maliciously compressed the implementation period of the EMC project in order to get the project, and eventually they have to make ends meet, and they have to take the shoddy. Good measures are needed to make up for it; due to the lack of independent third parties to evaluate the energy conservation of the project, users and energy-saving service companies have different opinions on energy-saving effects; the user party defaults or fails to pay the energy-saving service company according to the contract, resulting in difficulties in energy-saving service companies. Energy-saving service companies that provide services are difficult to apply for loan financing from banks and other financial institutions for reasons such as lack of fixed assets. These problems have caused many energy-saving service companies to face difficulties.

Many problems in the market, industry and service

In order to take projects, some companies drive down prices and compress EMC execution cycles.

Since 2009, the Global Environment Institute has begun to pay attention to the application and promotion of energy efficiency projects and conducted in-depth research on the LED lighting industry. According to the survey of project officials of the Global Environment Institute, the factors affecting the development of LED lighting EMC projects are mainly in the market, industry and service.

From the market point of view, the profit of LED lighting projects is not particularly high, which is the key to not being able to finance in time. In the LED lighting project with more successful EMC mode, the internal rate of return of the project is even less than 17%, and this rate of return can be achieved in the EMC contract cycle of 5 years or longer. Now, in order to get the project, some companies will announce that the contract period can be signed for 3 years or even shorter.

The malicious competition of lowering the price and compressing the EMC execution cycle has caused the project users to think that the LED lighting project is high return and even profiteering, which will further reduce the profit and even the living space of the energy service company. Such an industrial environment must cause unreasonable EMC project failures, and also seriously affect the business and even survival of formal energy-saving service companies.

From the perspective of the industry, most of the energy-saving service companies that are currently engaged in LED lighting projects in China are small and medium-sized enterprises, and most of them are in a weak position in the market. In the early communication with the owners, the qualifications of these companies are suspected, and the owners' commitment to energy conservation cannot be fully believed. At the same time, during the implementation of the LED project, energy-saving companies will face a series of problems such as new technology and new product challenges, energy-saving benefits, owner defaults, and government tariff adjustments.

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