Cities100: Seoul - Financial Incentives Spur Retrofits

Seoul is subsidizing energy efficiency upgrades in buildings, encouraging residents and businesses to retrofit their homes and workplaces.

The Challenge

As buildings are responsible for 56% of Seoul’s total energy consumption, the retrofit program is effective in curbing greenhouse gas emissions and reducing energy demand. In addition to encouraging citizens and businesses to act, the city is also making impressive strides with its own facilities by, for instance, replacing conventional lights in all 243 subway stations with LEDs.

The Solution

Seoul has unveiled a comprehensive program to retrofit its buildings, providing generous financial incentives and free consultation services to encourage all citizens and businesses to participate. To reduce the financial burden and encourage homeowners, tenants, building owners, and businesses to get involved, the city offers eight-year loans that cover all retrofit expenses at an ultra-low interest rate of 1.75%, lowered from the initial 3%. These incentives are clearly paying off, as increasing the loan coverage from 80% to 100% of retrofit costs sparked a huge increase in loan applications, from $4.4 million in 2012 to $20.7 million in 2014.

Seoul’s city government has also deployed “energy consultants,” who make house calls to small and medium-sized commercial buildings and homes, to provide free energy efficiency consultation services. By the end of 2014, 45,000 buildings had already received the service. The project aims to enhance energy efficiency in 90,000, or 20%, of outdated buildings that are more than 20 years old by 2018. To date, Seoul’s retrofit program has improved energy efficiency in 72,000 buildings.

Environmental Benefits – The equivalent of 1.04 million tons of oil is expected to be reduced in total in 90,000 buildings by 2018 through energy efficiency upgrades.

Social Benefits – Energy efficiency upgrades in 59 municipal social welfare facilities save the equivalent of 1,426 tons of oil each year, and the saved energy expenses are reallocated to improve welfare services.

Economic Benefits – In the first phase of the project, Seoul will save 57 GWh of electricity and $6.6 million in electricity expenses annually, allowing for a full recovery of the investment within seven years

About Cities100

Presented by C40 Cities Climate Leadership Group (C40), Sustainia and Realdania – Cities100 showcases leading solutions to urban climate challenges in ten sectors, ranging from solid waste management to transportation.

Available online and in print, Cities100 provides stakeholders an accessible format to explore achievable solutions for climate action in cities, and will be a useful tool for relevant groups ranging from impact investors and development organizations, to mayors and city governments.  You can access the full Cities100 2015 publication online here.