7396 P.Xu et al.Energy Policy 39(2011)7389-7398 The development of EPC industry is relatively late in China. performance contracting.The identification and the allocation of Financing institutes are not familiar with this mechanism.Finan- risks are an important issue in contractual arrangement (Gordon, cing for EPC project often is impeded because of the lack of 1994;Chan and Yu,2005),which include both the type and the awareness for financing institute to EPC mechanism and lack of content of the contract.There are several contracting models for credit history of clients and ESCOs.Another CSF,hotel operation EPC mechanism as mentioned above,equitable risk allocation and status,is a long term financial situation and operation status. saving share is required for delivering sustainable and successful Although project capital is recovered by energy and cost saving projects. after building retrofit,the long-term operation situation of the hotel itself is an important economic factor for success of these 4.2.7.Cluster 6:external economic environment long-term performance contracts.This factor is proposed by Cluster 6 is an external economic environment,which contains several interviewed experts,which is related to investment risk economic environment and available financing market.Strictly and project financing. speaking.available financing market belongs to economic envir- onment.This factor is related to project financing.Table 4 lists the 4.2.4.Cluster 3:knowledge and innovation of EPC,SD,and M&V max loadings of each CSF on each cluster.According to the factor This cluster consists of the awareness of clients to EPC, analysis result,the loading of this factor on cluster 6 is 0.539,and accurate M&V,and awareness of clients and ESCOs to sustainable on cluster 2 is 0.532.Hence,this factor could also be clustered development theory.This cluster is named as knowledge and into cluster 2.Belassi and Tukel (1996)suggested that some innovation of EPC,SD,and M&V.Measurement and Verification factors are external to the organization but they still have an (M&V)is one of the most important parts of EPC procedure,which impact on project success or failure.Various researchers support is to identify the project result and energy savings.The reliable "economic environment"as a factor affecting project success and undisputable M&V is one of the very key success factors of (Belassi and Tukel,1996;Chua et al.,1999;Chan et al.,2004; EPC,which was selected as the most important success factor in Zhang et al.,2008).Economic environment factors have their the questionnaire survey. impact on the working and decisions of business or projects are In China,customers,suppliers,engineering companies,banks. known as economic environment.It includes inflation,interest finance sector,and industry are all lacking awareness and informa- rates,economic policy.level of income,unemployment,energy tion of EPC (Wang.2008;Fu,1999;Yang et al,2004;Xie,2008) price,etc.Economic environment is very dynamic and complex in According to the collected information from interviews,most nature.It keeps on changing from time to time. leaders of hotel have willingness to reduce energy consumption. However,only few of them have heard about EPC.Lack of under- standing of EPC on the part of hotel managers impedes implement- 5. Conclusions ing EPC in hotel retrofit or contributes to their failure. This research is about delivering sustainable BEER in hotel The aim of this study is to develop a set of CSFs of energy buildings.Highlighting and promoting awareness of clients and performance contracting (EPC)for sustainable Building Energy ESCOs to the concept of sustainability could make project a Efficiency Retrofit (BEER)in hotel buildings in China.Firstly,28 success with sustainable development principles in planning. nominated factors were selected based on literature review and designing.and building retrofit. experts in-depth interviews.Then 21 Critical Success Factors (CSFs)were indentified based on questionnaire survey.According to the data collected in a questionnaire survey,importance of the 4.2.5.Cluster 4:implementation of SD strategy ranking of CSFs was presented.It was found that the most This cluster contains sustainable development strategy planning. important five factors are accurate measurement and verification available technology,control mechanism of sustainable development (M&V).trust,control mechanism of sustainable development strategy,policy support.In order to achieve sustainable development strategy.available technology.and effective coordination.After of EPC projects,sustainable development principle should be taken that,using the factor analysis technique the 21 identified CSFs in as a strategy to organize these projects.Business strategy manage- this study were grouped into six clusters.These are project ment consists of strategic planning and control mechanism of organization process,EPC project financing for hotel retrofit strategy plans.Strategy management for sustainable project is a tool knowledge and innovation of EPC,sustainable development to guarantee sustainable objectives of project through sustainable (SD),and M&V,implementation of SD strategy.contractual development strategic planning and control mechanism. arrangement,and external economic environment. Retrofit technologies reflect new equipment,new energy The results indicate that EPC team,client,ESCO,and other resources,new energy audit technologies,and new technologies of related departments who are directly or indirectly involved in this improvement measures.Affordable and appropriate technologies in work all can significantly influence the success of delivering a BEER decide the feasibility of these projects and the energy savings sustainable BEER project.In order to achieve EPC success for potential.Lack of policy incentive is a main barrier confronted by energy efficiency improvement of existing buildings(Zhong et al.. sustainable BEER projects in hotel building.joint efforts should be made by all the involved participants in the following items: 2009;Chan et al..2009).Although some incentive policies to EPC (1)Demonstration programs,education programs,and training. projects have been issued in some areas of China,none of them are The implementation of EPC mechanism is not mature in energy suitable for such small-scale project in hotel buildings.More policy efficiency projects,especially in building sector.Demonstration supports should be promulgated to clear such institute barriers as projects publicize successful examples of hotel building retrofit law,tax,and financial institutes.These are requirements for which could provide refereed case of EPC project organization and delivering sustainable BEER in hotel smoothly. delivery.Education programs should be provided by government, ESCO association,and hotel association,which could provide the 4.2.6.Cluster 5:contractual arrangement knowledge of these projects and improve the awareness among The two extracted CSFs,savings share and task and risk participants.Training of energy efficiency technologies could allocation,in cluster 5 are related to contractual arrangement. improve the skill of team members.(2)Economic incentives. These two CSFs are also selected into one category (see Table 1). Some economic incentive or policy support,such as special The contractual arrangement is the key mission of energy funding support,tax preferences,and loan warrant,etc.,couldThe development of EPC industry is relatively late in China. Financing institutes are not familiar with this mechanism. Finan￾cing for EPC project often is impeded because of the lack of awareness for financing institute to EPC mechanism and lack of credit history of clients and ESCOs. Another CSF, hotel operation status, is a long term financial situation and operation status. Although project capital is recovered by energy and cost saving after building retrofit, the long-term operation situation of the hotel itself is an important economic factor for success of these long-term performance contracts. This factor is proposed by several interviewed experts, which is related to investment risk and project financing. 4.2.4. Cluster 3: knowledge and innovation of EPC, SD, and M&V This cluster consists of the awareness of clients to EPC, accurate M&V, and awareness of clients and ESCOs to sustainable development theory. This cluster is named as knowledge and innovation of EPC, SD, and M&V. Measurement and Verification (M&V) is one of the most important parts of EPC procedure, which is to identify the project result and energy savings. The reliable and undisputable M&V is one of the very key success factors of EPC, which was selected as the most important success factor in the questionnaire survey. In China, customers, suppliers, engineering companies, banks, finance sector, and industry are all lacking awareness and informa￾tion of EPC (Wang, 2008; Fu, 1999; Yang et al., 2004; Xie, 2008). According to the collected information from interviews, most leaders of hotel have willingness to reduce energy consumption. However, only few of them have heard about EPC. Lack of under￾standing of EPC on the part of hotel managers impedes implement￾ing EPC in hotel retrofit or contributes to their failure. This research is about delivering sustainable BEER in hotel buildings. Highlighting and promoting awareness of clients and ESCOs to the concept of sustainability could make project a success with sustainable development principles in planning, designing, and building retrofit. 4.2.5. Cluster 4: implementation of SD strategy This cluster contains sustainable development strategy planning, available technology, control mechanism of sustainable development strategy, policy support. In order to achieve sustainable development of EPC projects, sustainable development principle should be taken as a strategy to organize these projects. Business strategy manage￾ment consists of strategic planning and control mechanism of strategy plans. Strategy management for sustainable project is a tool to guarantee sustainable objectives of project through sustainable development strategic planning and control mechanism. Retrofit technologies reflect new equipment, new energy resources, new energy audit technologies, and new technologies of improvement measures. Affordable and appropriate technologies in BEER decide the feasibility of these projects and the energy savings potential. Lack of policy incentive is a main barrier confronted by energy efficiency improvement of existing buildings (Zhong et al., 2009; Chan et al., 2009). Although some incentive policies to EPC projects have been issued in some areas of China, none of them are suitable for such small-scale project in hotel buildings. More policy supports should be promulgated to clear such institute barriers as law, tax, and financial institutes. These are requirements for delivering sustainable BEER in hotel smoothly. 4.2.6. Cluster 5: contractual arrangement The two extracted CSFs, savings share and task and risk allocation, in cluster 5 are related to contractual arrangement. These two CSFs are also selected into one category (see Table 1). The contractual arrangement is the key mission of energy performance contracting. The identification and the allocation of risks are an important issue in contractual arrangement (Gordon, 1994; Chan and Yu, 2005), which include both the type and the content of the contract. There are several contracting models for EPC mechanism as mentioned above, equitable risk allocation and saving share is required for delivering sustainable and successful projects. 4.2.7. Cluster 6: external economic environment Cluster 6 is an external economic environment, which contains economic environment and available financing market. Strictly speaking, available financing market belongs to economic envir￾onment. This factor is related to project financing. Table 4 lists the max loadings of each CSF on each cluster. According to the factor analysis result, the loading of this factor on cluster 6 is 0.539, and on cluster 2 is 0.532. Hence, this factor could also be clustered into cluster 2. Belassi and Tukel (1996) suggested that some factors are external to the organization but they still have an impact on project success or failure. Various researchers support ‘‘economic environment’’ as a factor affecting project success (Belassi and Tukel, 1996; Chua et al., 1999; Chan et al., 2004; Zhang et al., 2008). Economic environment factors have their impact on the working and decisions of business or projects are known as economic environment. It includes inflation, interest rates, economic policy, level of income, unemployment, energy price, etc. Economic environment is very dynamic and complex in nature. It keeps on changing from time to time. 5. Conclusions The aim of this study is to develop a set of CSFs of energy performance contracting (EPC) for sustainable Building Energy Efficiency Retrofit (BEER) in hotel buildings in China. Firstly, 28 nominated factors were selected based on literature review and experts in-depth interviews. Then 21 Critical Success Factors (CSFs) were indentified based on questionnaire survey. According to the data collected in a questionnaire survey, importance of the ranking of CSFs was presented. It was found that the most important five factors are accurate measurement and verification (M&V), trust, control mechanism of sustainable development strategy, available technology, and effective coordination. After that, using the factor analysis technique the 21 identified CSFs in this study were grouped into six clusters. These are project organization process, EPC project financing for hotel retrofit, knowledge and innovation of EPC, sustainable development (SD), and M&V, implementation of SD strategy, contractual arrangement, and external economic environment. The results indicate that EPC team, client, ESCO, and other related departments who are directly or indirectly involved in this work all can significantly influence the success of delivering a sustainable BEER project. In order to achieve EPC success for sustainable BEER projects in hotel building, joint efforts should be made by all the involved participants in the following items: (1) Demonstration programs, education programs, and training. The implementation of EPC mechanism is not mature in energy efficiency projects, especially in building sector. Demonstration projects publicize successful examples of hotel building retrofit, which could provide refereed case of EPC project organization and delivery. Education programs should be provided by government, ESCO association, and hotel association, which could provide the knowledge of these projects and improve the awareness among participants. Training of energy efficiency technologies could improve the skill of team members. (2) Economic incentives. Some economic incentive or policy support, such as special funding support, tax preferences, and loan warrant, etc., could 7396 P. Xu et al. / Energy Policy 39 (2011) 7389–7398