The government has lowered the interest rate on policy loans supporting energy efficiency investments for small businesses from 2.5% to 2.0%.
The Ministry of Climate, Energy, and Environment announced on October 5 that it has reduced the loan interest rate for the Energy Utilization Rationalization Fund by an additional 0.5 percentage points, effective October 1, to alleviate financial burdens on companies and promote energy efficiency investments.
The Energy Utilization Rationalization Fund provides long-term, low-interest loans for companies to install energy-saving facilities and invest in energy service companies (ESCOs). This year's program has a total budget of 276.5 billion won.
The variable interest rate for energy-saving facility installation projects and ESCO investments for small businesses and non-profit organizations was initially set to rise to 2.5% in the fourth quarter. However, due to this new measure, the rate will now be 2.0%. Considering that the variable interest rate for the third quarter was 2.25%, the fourth quarter rate will be 0.25 percentage points lower than the previous quarter. The ministry decided to implement the reduced rate starting in the fourth quarter after review by the Active Administration Committee.
The maximum loan support limit per business is 30 billion won. If fully utilized, the annual interest savings from the 0.5 percentage point reduction could reach up to 1.5 billion won. Companies with larger investments in energy-efficient equipment will benefit more from the interest rate reduction.
This year, 95 billion won has been allocated for ESCO investment projects, while 176.5 billion won is designated for energy-saving facility installation projects. Additionally, 5 billion won has been allocated for production facility installation projects, demand management facility installation projects, and long-term heat transport facility replacement projects.
Typically, ESCO investment projects allow for loans to be repaid in seven installments after a three-year grace period, while energy-saving facility installation projects have a five-year repayment period after three years of grace.
The support ratio is set at 90% for small businesses and non-profit organizations, 70% for medium-sized enterprises and public institutions, and 100% for ESCOs and heat transport projects. Companies that demonstrate high energy-saving effects or are leaders in energy efficiency innovation may receive an additional 10 percentage points in support.
To enhance the social value of policy funds, the ministry has also revised the detailed criteria for financial support. Social economy enterprises and small businesses with excellent environmental, social, and governance (ESG) practices will receive additional points in evaluations when applying for loans.
Oil Young, head of the Climate Policy Division at the Ministry of Climate, Energy, and Environment, stated, "This interest rate reduction will help alleviate the financial burden on small businesses and expand energy efficiency investments. We will strengthen policy financing support to ensure that companies continue to invest in energy efficiency improvements and greenhouse gas reductions."
* This article has been translated by AI.
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