Transcript ESCOs - 에너지관리공단

The role of ESCOs in reducing GHG emissions & the establishing
strategy for strong ESCO industry
ESCO Work in Mexico – Status
of the Market and Barriers
COP9 Milan, Italy
December 1, 2003
Mónica Pérez-Ortiz
Contents of the presentation
1. Options to finance Renewable Energy and Energy Efficiency
Projects in Mexico
2. Energy Services Companies
3. International Experience
4. National Experience
5. Action lines to foster ESCO market development in Mexico
6. Barriers to ESCO work
7. Strategy to strengthen the ESCO industry in Mexico
1. Options to finance Renewable Energy and
Energy Efficiency Projects in Mexico (1)
1. Economic resources of the client (energy end user) and
technical capacity of engineering firms
2. Banks financing and technical capacity of engineering
firms and/or efficient equipment manufacturers and
distributors
3. Financing and measures implementation through the
services of an ESCO
2. Energy Services Companies- Basics of the Scheme (1)


Companies that do business with the energy savings
opportunities at an energy end user’s facility based on a
performance contracting approach
They offer energy end users the opportunity of getting additional
resources without any own investment

Three main capabilities: Technical, Financial and of integration

They are part of a consolidated market in developed countries

Although some ESCOs develop projects based on one
technology, most of them have an integrated approach and
aim to combine as much technologies to have a greater
energy consumption reduction.
Before
Energy Bill
End
user’s
savings
Energy Bill
Payment
to ESCO
2. Energy Services Companies- Basics of the Scheme (2)
During the contract
(less than life span)
Project Start-up
Contract signed
After the
contract
Transfer of the equipment property
End of the contract
2. Energy Services Companies- Basics of the Scheme (3)
$ payment for
project
Project,
systems
CLIENT
ENGINEERING
FIRM
>risk
Project,
systems
 > Risk
 Investment capital
 No guarantees
ESCO
CLIENT
$ savings
>risk
achieved
$
payment
Investment
Capital
FUNDING
2. Energy Services Companies - Advantages (4)

The client keeps focusing on its core business

The client transfers technical and financing risks to the ESCO

Null or very low investment of the end user - client

No debt or financing load will be registered to the client

Guaranteed savings Vs. Conditioned payment

Long term energy and economic savings, even after the contract period

Project optimization due to the ESCOs savings oriented vision,
instead of a cost minimization approach of engineering firms

Operation and maintenance during the period of the contract,
and in some cases training
3. International Experience (1) – USA

By the end of the 70’s and beginning of the 80’s
 Performance contracting starts
 Several initial projects were based on shared savings
 Now most of the projects are developed under
guaranteed savings scheme

ESCOS were developed from engineering firms, building
controls and equipment manufacturers, and Demand
Management Programs from the Utilities
3. International Experience (2) – USA

Some projects have been developed in the private sector
(comercial and industrial); however, most of the projects are
developed in the public sector: Municipalities, Hospitals,
Schools, and Universities

There are two organizations in charge of promoting ESCO
project development
 NAESCO
 Energy Services Coalition
3. International Experience (3) – Other countries
Based on a survey carried out by the Lawrence Berkeley National
Laboratory to 38 countries in relation to ESCO activities in their
countries, we have that
The number of ESCOs varies from country to country,
 Belgium, Nepal, Thailand and South Africa have less than 7
 U.S.A., Brazil, Germany, Korea, and Switzerland, have
more than 50
The total ESCO activity outside the USA in 2001 oscillates between
$560 and $620 million USD
 From 1/2 to 1/3 of USA’s ESCOs for 2002
 In 2002, this activities are expected to be around
50-75% of the U.S.A. activity for this same period.
4. National Experience – Status of the Market in Mexico




In Mexico there are around 10 ESCOs
Projects in Industrial and Hotel Sectors
Increasing number of Engineering Firms and energy efficiency
equipment and systems’ manufacturers interested in offering
ESCO services (different needs)
Own resources and participation of foreign partners
ESCOs are offering standard performance contracting including
shared savings whereby ESCO is capitalizing installation cost
4. National Experience – Status of the Market in Mexico

The number of Financial players is limited, there are very scarce
resources and there is no participation of commercial banks.

The financing that is available by the existing players is expensive

M&V does not appear to be a constraint for ESCOs


Very little CDM activity. There is knowledge of the potential but
only one ESCO has followed almost the whole process of carbon
credit accreditation
There are several successful projects in Mexico
4. National Experience – Status of the Market in Mexico Some
projects of Mexican ESCOs
PROJECT
Diram
Ecotherm
ANNUAL ECONOMIC
SAVINGS (THOUSANDS
OF DOLLARS)
PROJECT
ANNUAL ECONOMIC
SAVINGS (THOUSANDS
OF DOLLARS)
43.5
500.0
21.0
200.0
96.0
Optima
95.0
10.8
500.0
120.9
210.0
72.0
61.6
175.1
Empresas ESM
Total
120.0
2,225.8
5. Action lines to foster ESCO market development in Mexico
Based on LBNL’s survey, several types of strategic actions are
needed for fostering ESCO industry internationally

Increase information about energy-efficiency projects,
financing opportunities, and services offered
by ESCOs.

Ensure that ESCOs provide a qualified and reliable service.

Create more information for financial institutions,
and provide incentives to the “first movers” in
this sector.

Develop funding sources for ESCO-type work.
5. Action lines to foster ESCO market development in Mexico

Standardize contracts for ESCOs.

Standardize measurement and verification for ESCO projects.

Conduct ESCO demonstration projects.

Promote energy performance contracting in local, regional,
and federal government buildings.

Develop a third-party financing network.

Establish an equipment-leasing organization.
5. Action lines to foster ESCO market development in Mexico
1) Promotion
 Organization of 11 events and meetings and 29 site visits
 Presentation of the scheme to Industry Chambers
and Associations
2) Development of tools and support documents

Guide for ESCO project development

Guidelines with recommendations to develop
performance contracts
Portfolio of 15 Successful ESCO project cases


10 summaries of opportunity areas with identified potential
around $29 million USD.
Portfolio with curricular information of Actors

ESCO section at CONAE’s website

5. Action lines to foster ESCO market development in Mexico
3) Support to ESCO pilot projects development

Contact, follow-up in negotiations

2 projects for the hotel sector for $3.4 and $3.3 millions USD
in 10 years contracts each of them

1 project of $4.5 millions USD for the industrial sector in
a 7 years contract period
4) Catalyzing activities and promotion of the establishment
of strategic alliances

ESCOs, Potential Clients – Energy End Users,
Financing institutions, Energy efficient equipment’s
manufacturers and distributors, and Support Institutions
6. Barriers to ESCO Work in Mexico (1)


Lack of expertise in the design and negotiation of performance
contracting
 High transaction costs to get performance contracting
know how (legal advisory)
 Negotiation and Main contact at the facility – time consuming
Process – Should aim to the highest hierarchy level
Lack of confidence and acceptance due to a lack of clear
market understanding of ESCO and performance contracting
 Too good to be true
 ESCOs profit is too high
 Who certifies ESCOs?
6. Barriers to ESCO Work in Mexico (2)

No payment culture

Regulatory contraints for ESCO project development in the
federally owned facilities

Incapability of committing future resources
 Alternative

- Private-Public Partnership (PPS)
Mexican ESCO with similar approach, the ESCO provides
a service and payment shall not be made until the services
are used
6. Barriers to ESCO Work in Mexico (3)

Financing
1. The number of Financial players is limited with no participation
of commercial banks
2. The financing that is available by the existing players is expensive
3. Even with available funding, it is very difficult to get financing due

Risk perception

Extremely high guarantees

Fit ESCOs into the traditional way of doing business
6. Barriers to ESCO Work in Mexico (4)
CTP is developing a financing document that reviews the current
conditions that Mexican ESCOs face to access financing, and the
potential national and foreign project funding sources. The paper
includes:

Background information,

Action taken and remaining barriers

Recommendations to overcome the financing barriers

Chart of financing options for ESCO project development

Case Study of ESCO project developed by a Mexican ESCO

Analysis of a Survey conducted by CTP to 6 Mexican ESCOs
7. Strategy to strengthen the ESCO industry in Mexico (1)
1. Promotion – Outreach and education to increase awareness of
the benefits of performance contracting
 financial institutions,
 energy end users (particular – associations)
 manufacturers and distributors
2. Strengthen the offer of ESCOs by
a) Establishing a Loan Guarantee Fund (there is a current initiative)
b) Help establish a financing mechanism that will allow ESCOs
to bundle several projects and reduce transaction costs
Current initiative of the World Bank to develop a study
to design this financial mechanism
c) Establish a line of credit to finance projects
…. Cont.
7. Strategy to strengthen the ESCO industry in Mexico (2)
2. Strengthen the offer of ESCOs by (cont.)
d) Foster establishment of strategic alliances to
 Allow Mexican ESCOs to access international financing more
easily and increase their equity after sharing the debt with the
international counterpart

Help build local capacity by transfer of know how
Through CTP Activities, 3 ESCOs are already working together
with an International ESCO to jointly develop projects
One of the Mexican ESCOs, Optima Energia, has identified
potential for 50 million USD in projects, and are very positive that
this international ESCO will be participating in some of them
7. Strategy to strengthen the ESCO industry in Mexico (3)
3. Support to project development
a) Technical Assistance
b) Assistance in establishing the contact, negotiations and follow-up
c) Capitalization of Experiences – Promotion of results
Contact Details


Mónica Pérez-Ortiz
CTP In-country Coordinator
Nrel
Tel: 52(55) 5322 1000 ext. 1149
email: [email protected]
Jeannie Renné
Leader of Environmental Projects
Nrel
Tel: 1(303) 384 7469
email: [email protected]

Ubaldo Inclán
Director of Financing and
Environment
Sener - Conae
Tel: 52(55) 5000 6000 ext. 1344
email: [email protected]
http://www.conae.gob.mx//wb/distribuidor.jsp?seccion=27