Building Retrofit Program (BRP); Loan Support Scheme

Location: Seoul, South Korea

Population: 9.776 million [city area]

Climate: Humid subtropical

Duration: 2012- currently

Sector: Buildings

Funding sources: Public

City networks: C40 & Global Covenant of Majors

Savings: Savings of 25,841 t-CO2 for the period 2012 to 2015.

Solutions: BRP loan support scheme for all groups of building stakeholders.

Multiple benefits: CO2 reductions and energy savings.

Seoul Metropolitan Government (SMG’s) Building Retrofit Program (BRP) establishes to advance energy efficiency in government, commercial and residential buildings to seek progress towards the One Less Nuclear Power Plant target and the citywide CO2 reduction goal of 40% by 2030, from 2005 levels.

In 2012, the focus and strategy of BRP expanded measures to explicitly drive retrofitting in residential buildings by integrating a loan support scheme with cooperation of private lending institutions.

Objective – This initiative fosters energy efficiency refurbishments by facilitating access to highly attractive, low interest rate loans with generous repayment and grace periods. As well, it decreases financial barriers to key building technologies such as high performance insulated windows and doors.

Solutions – The establishment of the BRP loan. For doing so, SMG has recruited six banks to serve as official partners and agencies for the loan support scheme. At the same time, a large number of MOUs have taken place between the private sector and SMG.

Anyone within the Seoul metropolitan area can apply for a BRP loan. Key characteristics of the BRP loan include: 1) In terms of eligibility, it includes the owners and tenants of both residential (including multi-family buildings and single apartments, townhouses or detached housing) and commercial buildings. Furthermore, Energy service company (ESCO) registered businesses and energy saving equipment suppliers and installers may also apply to the loan to expand business operations; 2) regarding financing, it may be used, for example, to procure and replace high-performance insulation and windows, LED lighting and lighting equipment, air-conditioning and heating systems and renewable energy production facilities; 3) the support scheme offers two types of BRP loans: “Housing BRP” targeting the residential sector and “Building BRP” (non-residential) targeting commercial buildings.

Funding – (South Korean won) KWR 22.5 billion was set aside for funding the loan scheme in 2012. KRW 15 billion has been set aside for 2016. The SMG Climate Change Fund covers the project funds. These are transferred to applicants as a loan from the financial institution. Once funds are received and the retrofitting project implemented, a completion report is then submitted to the financial institution.

Innovation – 1) The BRP loan scheme is the first programme in Seoul to cover residential buildings of all types and size; 2) Additionally, the loan support scheme is open to all groups of building stakeholders such as owners, tenants, ESCO operators and retrofitting contractors. This approach of opening the scheme to diverse stakeholders has several impacts. Firstly, there have so far been several cases of tenants participating in the scheme. These applications have usually involved the financing of projects which have a shorter period of return on investment and relatively high energy reduction effect such as replacements of indoor lighting to LED. Secondly, by working with ESCOs and contractors, SMG has forged several MOUs with construction material suppliers. These provide citizens with insulated windows and doors at reduced prices when bought as collective purchasing. Third, by providing low-interest loans to ESCOs.

Success factors – 1) Multiple and attractive financial incentives; 2) Involvement of ESCOs and installation contractors. Since ESCOs and retrofitting contractors are able to apply for project funding, these stakeholders serve as powerful marketers and promoters of the scheme; 3) Sustainable business model. The BPR loan support scheme does not rely on subsidies for its sustenance. It draws instead on funds from the SMG Climate Change Fund.

Significant outcomes:

• Achieved a savings of 25,841 t-CO2 for the period 2012 to 2015 from approximately 4,200 projects implemented through the scheme.
• Over 2012 to 2013, 100 buildings achieved an energy use reduction in tonnes of oil equivalent (TOE) of 10% in residential housing and 6.5% in the non-residential building sector.
• The initiative has succeeded in motivating approximately 4,000 residential

applicants to invest in reducing home energy use and upgrading properties.

It is also remarkable that several tenants have used the scheme to fund lighting

upgrades to LED.

Synergies with local policies:

• One Less Nuclear Power Plant. The energy policy´s targets are to reach 20% electricity self-reliance rate, cut greenhouse gas emissions by 10 million tons and reduce energy use by 4 million TOE compared to 2011 levels. Also, 20,000 buildings and houses took part in the Building Retrofit Project, and 9.60 million lights were replaced with eco-friendly, high energy-efficient LED bulbs [source].
• The Promise of Seoul. In 2015, Seoul set a new ambition to reduce greenhouse gas emissions and take action against climate change. This citizen-led project aims to curtail CO2 emissions by 25%, or 10 million tons, by 2020 [source].

 Political alignment:

• National Roadmap for Greenhouse Gas Reductions by 2030. It targets the reduction of greenhouse gas output by more than 200 million tons by 2030. The plan affects eight different economic sectors. Out of those, the power generation sector will see the biggest reduction of more than 19% of greenhouse gas output.
• Korea Renewable Energy 3020 Plan. The Korean Government sets a goal to produce 20% of its energy from renewable sources by 2030 and increase relevant job creation. It will also deploy eco-environment with low-carbon energy and govern energy system adapting to the new climate regime.
• Green New deal. The country will commit to achieving carbon neutrality by 2050. South Korea aims to boost green infrastructure, clean energy, and electric vehicles by 2025. Besides, there will be an additional spending of USD 7 billion on carbon-cutting measures as replacing old buildings and public rental housing with eco-friendly facilities and investing 2.4 trillion [Korean won] in the green transition for urban spaces and daily infrastructure [source].
• Third Energy Master Plan. The goal is to achieve sustainable growth and enhance the quality of life through energy transition. In this light, the Energy Master Plan will surely serve as a solid framework as well as a mid- and long-term vision for Korea’s energy transition.

 Marketability:  

N/A