Transcript Creating competitive business advantage through the

Financing Energy Efficiency Through ESCOs and
Energy Performance Contracting
20 October 2011
ESCOs Defined
•
An Energy Service Company is a commercial business providing a broad range of
comprehensive bundle of energy efficiency, water efficiency, operational
efficiency, renewable and distributed energy generation measures.
•
ECSOs provide turn-key responsibility including: site audits, detailed design and
engineering, business case analysis, installation, commissioning, and
measurement and verification to international standards.
•
The savings from a typical ESCO project are used to pay back the capital
investment over the lifetime of a project (typically 5-20 years).
•
The ESCO assumes performance risk for a project in the form of a long-term
performance guarantee (to ensure savings materialise and are preserved over
time).
•
Typical instrument is the Energy Performance Contract (EPC).
GHG Abatement Curve
Energy Efficiency is the Lowest Cost
Strategy
Most economically viable and
readily addressable
opportunities are related to
buildings.
EU Building Sector
Europe’s buildings waste €270 billion of energy every year
Energy Performance Contracting
EPC is an innovative financing technique that repays the cost of projects through the
cost savings they produce.
Advantages:
 Provides building owner with access to outside capital for projects by transferring the risk to
the ESCO.
 Guaranteed Savings.
 Reduced operating costs of a building.
 ESCO provides a truly turnkey solution.
 Comprehensive measure for a facility (deep retrofits).
 Immediate improvements are made;
 Buildings upgraded with modern, reliable energy efficiency equipment.
 Comfort conditions are improved for occupants.
 Reduced carbon emissions
 Creates Jobs.
 Proven process.
Energy Performance Contracting II
EPC has been used in the public and institutional sectors (esp. in NA) for the last 20+
years.
Industrial
6%
Commercial
9%
Residential
3%
Performance Contracting Activity in
US by Building Type
Public Housing
2%
MUSH
58%
Federal
22%
EPC – The Model
EPC – The Process
Contract
closure
Preliminary
study
Preliminary
audit
Detailed
analysis
Detailed
engineering
study
Enough inefficiency to
fund an improvement
programme?
Level of savings
delivered over what
period?
Implementation
Planning,
installation,
project
management
What are the finance &
contractual
arrangements?
Changes in
energy use
accounting
Guarantee
phase
Energy Saving
Guarantee
measurement &
verification service
(IPMVP)
How do I know the
savings are being
delivered to pay for the
programme?
EPC – A Bundle of Measures
Ventilation fans
Lighting replacement,
control systems &
LEDs
Solar gain
minimization
Roof Insulation
Building
Management Systems
Damper control
Wall Insulation
Zone
temperature
control
Voltage
reduction
Chiller
upgrade/replacement
& absorption cooling
Plug load
management
On-Site Technical Resource
Management
VSD motor control
High efficiency motors
Boiler upgrades, controls
Combined Heat & Power
Why use EPC?
■ Can be completely self funded
■ Transfers financial and equipment performance risk to
the ESCO – if the savings target isn’t made, the
ESCO pays the difference, it’s guaranteed !
■ Immediate improvements are made
■ Buildings upgraded with modern, reliable energy efficient
equipment
■ Comfort conditions are improved for occupants
■ Carbon reduction
■ Creates new jobs & generate work for SMEs
■ Proven process, used for more than 30 years
The EPC programme money is already
in the building owner’s budget,
currently paying for wasted energy !
EPC – Barriers & Solutions
EPC is a successful model throughout North America, yet only exists in pockets in
Europe.
Key Barriers include:
 Lack of awareness and trust.
 Reluctance or not able to access third party financing (financing itself is not an issue).
 Procurement process.
 Administrative and legal barriers.
 Selective financing.
 Lack of policy clarity and incentives.
 Over-reliance on government funding.
 Accounting and budgetary rules.
Possible solutions includes: legislative and governmental support, removal of
administrative & legal barriers, accounting rules, continued promotion,
standardisation, and continued focus on energy efficiency.
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Johnson Controls