120110 EPC 3 0 san (2)
Download
Report
Transcript 120110 EPC 3 0 san (2)
Energy service companies
...ESCOs and EPCs, past, present and future
Presented by
Charles Ogilvie and Andrew Shortis
Serco Energy
12 January 2012
Biogs
Andrew Shortis:
Engineering, and management consultancy background. Former VC
Experienced at delivering strategy lead growth and corporate recoveries
Appointed to develop the strategy and prove a new Energy business concept
Charles Ogilvie:
Lead Greg Barker’s policy team in opposition
Independent strategy consultant in new energy sector
Joined Serco as Head of Strategy in Energy business
Serco Energy Management Solutions partner with customers to deliver a phased
programme of works that will not only deliver guaranteed energy demand reduction but
also investigate, and where viable, integrate on-site renewable energy generation
capacity.
2
Serco Internal
Index
Brief history
Market drivers
Case study
Variations in the model
Conclusions
Public sector?
3
Serco Internal
Brief history
Oil shock
– Time Energy
Slow growth in US but model evolved
– Monopoly Utilities made model more ‘stable’
– Sector specialists
– By the 90s ESCO sector re-emerges in US, typified by Amaresco (2000)
Pioneered in the UK and Europe in the late 80’s and 90’s
– Limited by technology capability and costs – and stable low energy prices
– UK turnover mainly med/large CHP and chauffage- mostly in industry
– Utility competition and low energy prices meant little development of market
in 1990s for smaller customers
– Now ∼50 ESCOs investing £100-200m pa total annual income of ∼£1bn
4
Serco Internal
US/UK sector growth
~$950m
~$700m
5 Goldman,
A Survey of the U.S. ESCO Industry: Market Growth and Development from 2008 to 2011, Satchwell,
Serco Internal
Larsen, Gilligan, Singer- Berkeley National Laboratory, June 2010, Uk market DATA from ESTA and Sorrell 2005
Drivers
Rapidly rising energy prices – ROCS etc!
Pressure on Governments and private companies to reduce spending
Finance looking for more market insulated investments
Increasing legislative support (for efficiency, reduced CO2 emissions,
encouraging renewable energy)?
Lower tech costs: BEMS price down tenfold (capex/ kWh saved)
Replacement of aging infrastructure
6
Serco Internal
Drivers
DECC forecast central price scenario for energy consumption assumes
a 30% saving on energy consumption across economy by 2020 and a
40% saving by 2030- this includes transport where energy
consumption will rise with electrification
350
300
BOEm
250
200
BAS@2%
BAU
150
DECC projection
100
50
0
7
Serco Internal
Case study: Logistics Company
Reduce energy consumption and
carbon emissions in UK cold stores –
energy significant proportion of
operating costs
LED replacement lighting pilot proven
substantial savings
– Lower energy consumption
– Less heat produced – reducing thermal
load on the chillers
– Switchable by sensors – saving energy in
lighting and refrigeration
– Longer operating life and less
maintenance
Potential 85% cut in lighting energy
costs – better working conditions
£xxxm needed to fund an initial roll-out
to xx sites – then further xxx
Case study: Paid from savings model
Capital is invested
into SPV
Investor
Finance
Investor receives
share of the
energy savings
achieved
Special
Purpose
Vehicle
Project Company
SPV funds the
implementation of
the energy
efficiency projects
Customer
SPV is paid a
share of the
energy savings
achieved
Energy costs
Savings retained by customer
Savings retained by investor
Before
project
During
project
After
project
Serco Internal
Case study: How this would work
Share of
energy
savings
Special
Purpose
Vehicle
Logistics Co
Equity
investment
Financier
Investment
return
Energy
Performance
Contract
Performance
guarantee
Procurement
& installation
Serco
Lighting Co
Serco Internal
Case study: Features and benefits
Investor funds full cost of the project – no Customer capital contribution
Return is entirely contingent on realised energy cost savings
All of the risk is with the investor delivering the service (not assets)
No minimum funding payment to make – no savings, no repayment
Investment can be held off-balance sheet – confirmed at outset
Enhanced Capital Allowances can be paid-on to the Customer
Customer have a right to purchase the assets at any time during the
Energy Performance Contract (EPC)
Simple, straightforward and quick realisation – 6-8 weeks
Serco Internal
Case study: Investment proposal
Four year Energy Performance Contract (EPC)
– 43% of saving comes from lower energy consumption of lamps
– 13% through sensing and switching
– 22% due to the lower thermal load on the chillers
– 18% through lower maintenance costs and less down time
– 4% from saving in Carbon credits
Customer gets at least 20% energy cost savings during the EPC – and
all of the energy cost savings in excess of the ROI
Serco and Lighting Co make up any shortfall in the expected ROI
Measurement at one site will be used to help confirm savings made
At the end of the EPC, title and all the benefit transfers to Customer
Serco Internal
Variations in the model
Full ESCO, 5+
technologies,
service
contract.
Multi tech
EPC
Onsite generation
with service/ fuel
contract
Single tech
EPC
EG?
-voltage optimisation
-EIS funded
-.5-2m capex
-LEDs, voltage
optimisation, BEMS, AC
motor retrofit
-EIS/PE funded
-1m+ capex
-boiler plant, lighting,
insulation, BEMS, draught
exclusion, PV
-PE, institutional funds
-£2m+ capex
-district heating/CHP
-debt project finance
-£3m+
-any
-public sector?
-large sites make sense
-Local authorities, large
estates, mid size
commercials
Customers?
-B2B sales
-aggregated small sites
?
Serco Internal
PROs/CONs
Full ESCO, 5+
technologies,
service
contract.
Multi tech
EPC
Onsite generation
with service/ fuel
contract
Single tech
EPC
CON
-scale aggregation
-opportunity ‘lock out’
-simple savings
-smaller market
-solution design risk
-investor comprehension
-harder to control
operational risk
-hard to sell
-buying energy
-expensive development
costs
-blocked by incumbent FM
-tech capex heavy
-planning
-secure fuel supply/cost
-tied into utility contracts
-greater access to
compound savings
-bigger market
-full market
-squeeze out all savings
-operational comfort
-safer revenues
-established and easier to
finance
PRO
-easy sale
-low development costs
-lower solution risk
-differentiation
Serco Internal
More variations in the model
– M+V
– Asset ownership
– Flow of funds
– Risk/warranty/insurance
– Accountancy treatment
PLUS
-Policy complexity
Social housing project uses: CERT, CESP, RHI, FITs, ECAs, EIS etc –
GD?!
-Planning.....
15
Serco Internal
EG Monitoring and Verification
Description
Typical Application
Partially
Measured
Retrofit Isolation
Savings are determined by partial field
measurements of the energy use of
the system(s) to which an ECM was
applied. Some, but not all, parameters
may be stipulated.
Lighting retrofit where pre-and postretrofit fixture Wattages are measured.
Operating hours of the lights are typically
agreed upon
Retrofit Isolation
Savings are determined by field
measurement of the energy use of the
systems to which the ECM was
applied.
Variable speed drive on a pump.
Electricity use is measured by a kWh
meter installed on the electrical supply to
the pump motor.
Whole Facility
(Utilities)
Savings are determined by measuring
energy use at the utility meter level.
Bills may be corrected for weather.
Several ECMs affecting many systems in
a building. Utility Bills are used
Simulation
Savings are determined using building
simulation. This option is rarely used,
and is used primarily when there is no
pre-retrofit utility data available.
Multifaceted energy management
program affecting many systems in a
building but where no base-year data are
available.
16
Serco Internal
Early conclusions
Sales only happen when customer and financier understand the deal
More measures, more savings, harder to sell
Few people have real track record, even those who say they have..
Customers spend ‘free’ money as carefully as their own
Approach to risk still reflects a very immature market
Every project need a good baseline but not every project needs 3rd
party M+V to recognise international standards.
No-one in the private sector is buying escos
Selling single intervention can start to develop a relationship
It’s just a deal
Serco Internal
What’s going to change?
Finance
Accept/ understand project risks
Cut Tx costs and reduce cost of capital
Learn to aggregate projects
OEM/Suppliers
Willingness to deliver wider range of solutions
Recognise and squeeze out best savings
Provide stronger performance guarantee
Customer
Awareness
Learning how to buy
Willingness to lose some op control EPC-ESCO
18
Serco Internal
UK Trends/Forecasts
Utilities
– Model remains at odds with sales volume business model
– Sector changing as a result of regulation
OEMs
– Can grow market share with balance sheet financed deals and
performance warranties on their own kit
– Will do well for narrower solutions and through procurement frameworks
Service companies
– Slow starters but no reason why they can’t perform as well as in US
19
Serco Internal
How to accelerate deployment?
Stimulate
25% target – government buying
Accreditation for new tech/ solutions aimed at finance community
Experience sharing/ best practice/ procurement advice
Dampen
Competing Efficiency grant schemes? GD??
Picking winners
Overlooking novel tech and new entrants
20
Serco Internal
Conclusions
Horses for courses- but which ones and why?
Utilities favour generation and full esco/chauffage model- why- sell kit
and protect market share
OEMs look for tech (sales) driven projects initially focussed around
their offering
Service Cos will make this feel like FM+
ESCOs? Consultants + finance + entrepreneurs. Will be drawn to
complex solutions but initially struggle to deliver much third party
funded projects outside single solutions (risk management)
Serco Internal
Public Sector?
Shares many challenges with private sector
– Understanding the solution
– Lack of clear executive focus on problem
– Operational concerns
But enhanced by:
– Restricted borrowing – but many authorities do have funds
– Lack of off balance sheet certainty – solvable?
– Frameworks restrict creativity
– Public procurement restricts speculative project development
– Procurement expertise limits speed of sale
Successes:
– LEEF has energised sector
22
Serco Internal