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Course on Regulation and Sustainable Energy in Developing Countries - Session 9
Course on Regulation and Sustainable Energy in Developing Countries - Session 9
Course on Regulation and Sustainable Energy in Developing Countries - Session 9
Course on Regulation and Sustainable Energy in Developing Countries - Session 9
Course on Regulation and Sustainable Energy in Developing Countries - Session 9
Course on Regulation and Sustainable Energy in Developing Countries - Session 9
Course on Regulation and Sustainable Energy in Developing Countries - Session 9
Course on Regulation and Sustainable Energy in Developing Countries - Session 9
Course on Regulation and Sustainable Energy in Developing Countries - Session 9
Course on Regulation and Sustainable Energy in Developing Countries - Session 9
Course on Regulation and Sustainable Energy in Developing Countries - Session 9
Course on Regulation and Sustainable Energy in Developing Countries - Session 9
Course on Regulation and Sustainable Energy in Developing Countries - Session 9
Course on Regulation and Sustainable Energy in Developing Countries - Session 9
Course on Regulation and Sustainable Energy in Developing Countries - Session 9
Course on Regulation and Sustainable Energy in Developing Countries - Session 9
Course on Regulation and Sustainable Energy in Developing Countries - Session 9
Course on Regulation and Sustainable Energy in Developing Countries - Session 9
Course on Regulation and Sustainable Energy in Developing Countries - Session 9
Course on Regulation and Sustainable Energy in Developing Countries - Session 9
Course on Regulation and Sustainable Energy in Developing Countries - Session 9
Course on Regulation and Sustainable Energy in Developing Countries - Session 9
Course on Regulation and Sustainable Energy in Developing Countries - Session 9
Course on Regulation and Sustainable Energy in Developing Countries - Session 9
Course on Regulation and Sustainable Energy in Developing Countries - Session 9
Course on Regulation and Sustainable Energy in Developing Countries - Session 9
Course on Regulation and Sustainable Energy in Developing Countries - Session 9
Course on Regulation and Sustainable Energy in Developing Countries - Session 9
Course on Regulation and Sustainable Energy in Developing Countries - Session 9
Course on Regulation and Sustainable Energy in Developing Countries - Session 9
Course on Regulation and Sustainable Energy in Developing Countries - Session 9
Course on Regulation and Sustainable Energy in Developing Countries - Session 9
Course on Regulation and Sustainable Energy in Developing Countries - Session 9
Course on Regulation and Sustainable Energy in Developing Countries - Session 9
Course on Regulation and Sustainable Energy in Developing Countries - Session 9
Course on Regulation and Sustainable Energy in Developing Countries - Session 9
Course on Regulation and Sustainable Energy in Developing Countries - Session 9
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Course on Regulation and Sustainable Energy in Developing Countries - Session 9

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Session 9 is devoted to Energy Services Companies (ESCOs). First, it introduces the Energy Performance Certificates concept and EPC contractual approaches. Then, it presents the need for measurement …

Session 9 is devoted to Energy Services Companies (ESCOs). First, it introduces the Energy Performance Certificates concept and EPC contractual approaches. Then, it presents the need for measurement and verifications (M&V). It presents different ESCOs models:

the utility-based ESCOs with the cases of Croatia and Uruguay;
the Governement-based ESCO with the case of India;
the private sector ESCO with the case of China.
It concludes with the examples of institutional development schemes in Tunisia and Ivory Coast.

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  • 1. Energy Performance Contracting Energy Services Companies (ESCO) Webinar 5 April 2012 Pierre Langlois President - Econoler Course on Regulation and Sustainable Energy in Developing Countries – Session 9 www.leonardo-energy.org/course-regulation-and-sustainable-energy- developing-countries1
  • 2. Energy Performance Contracting Energy Services Companies (ESCO) By Pierre Langlois President Econoler Webinar April 5, 20122
  • 3. PRESENTATION STRUCTURE 1. EE benefits and barriers 2. The EPC concept 3. EPC contractual approaches 4. EPC financing structures 5. Measurement and verification 6. ESCO: different models and examples3
  • 4. 1. EE PROJECTS BENEFITS AND BARRIERS4
  • 5. END USER BENEFITS › Lower operational costs › Optimization of equipment operation › New and modern equipment (increased value) › Improved competitiveness › Improved product quality › Higher comfort level › Green image5
  • 6. BARRIERS Awareness Knowledge Lack of capacity Lack of confidence in project results and Financing6
  • 7. 2. ENERGY PERFORMANCE CONTRACTING7
  • 8. ENERGY PERFORMANCE CONTRACTING A contractual arrangement between a beneficiary and a provider (called an Energy Service Company) for the implementation of an EE project, where the global investments have to be paid for through a contractually agreed level of energy cost reduction.8
  • 9. ENERGY SERVICE COMPANY A firm that provides integrated solutions for enhanced energy cost reductions and whose payments are directly linked to project performance.9
  • 10. THE EPC APPROACH Contractors Client Equipment manufac- turers Governments Financial ESCO institutions Guarantee •Analysis Professional •Concept consulting •Installation engineer •Financing Energy •Monitoring Suppliers •Training10
  • 11. THE SKILLS OF AN ESCO Development Technical Sales IGA Marketing Engineering M&V Financial Project Construction Direct financing Management or arrangements Management or execution Legal Risk Management Contracts For guarantee of savings Local regulations and for cost and delay control Training and Operation & Management Maintenance Support (Occasionally)11
  • 12. Figure 1: Overview of Comprehensive Project Service Sales Process (continued) ESCO Customer provides establishes Preliminary survey and energy bills and preliminary scope walk-through of customer operating cost data and budget for facility potential project ESCO Verification of energy understands and validates savings methodology, customer procurement process, customer Customer verifies concerns and spending categories and ESCO findings issues as well as other project financial needs parameters ESCO creates proposal summarizing all info from previous Preliminary proposal Customer reviews step; preliminary budget estimates used ESCO signs Letter of Intent (LOI) Customer signs12
  • 13. Figure 1: Overview of Comprehensive Project Service Sales Process (continued) ESCO finalizes all project parameters incl.: ops, energy, & cap (if any); financing; Conduct implementation detailed engineering study, ; Customer reviews schedule; contract initiate contract and preliminary development starts start financing discussions contract ESCO conducts a complete review of job Risk review estimates and risks; contract finalized ESCO prepares presentation with Customer reviews final project Proposal presentation contract and parameters financing and benefit statements Energy Service ESCO signs Agreement (ESA) Customer signs Project implementation13
  • 14. 3. EPC Contractual Approaches14
  • 15. Guaranteed Savings Concept Achieved energy savings Client retains 100% of savings Bank loan to Client pays ESCO during client which implementation provides Client guarantees Client BANK reimburses loan directly ESCO reimburses for to the bank underperformance of ESCO the project Financial institution15
  • 16. Shared Savings Concept ESCO Client Financial institution16
  • 17. “Chauffage” Concept ESCO supplies ESCO implements energy from project and owns the facility energy facility Typically pays 10% - 30% equity share Customer pays ESCO ESCO for energy Energy Bank lends 70% - Customer 90% of project facility costs to ESCO ESCO is the borrower BANK ESCO assigns receivables from customer directly to bank (sometimes pays via bank) Lending Loan is usually secured with energy assets institution17
  • 18. CURRENT USE OF THE CONCEPTS The more the country is developed Guaranteed savings The less the country is developed Shared savings It should actually be the reversed18
  • 19. EPC AROUND THE WORLD More used around the world Greatly underdeveloped world wide Important barriers in the public sector du to procurement issues No good information on the market size available19
  • 20. EPC AROUND THE WORLD Concept is expending in many countries North America still the biggest market EPC is used in many different forms Europe will use more EPC base on the current CC objectives and regulations (EC directives)20
  • 21. 4. MEASUREMENT AND VERIFICATION21
  • 22. A NATIONAL BASELINE 1,000,000 Baseline + Adjustments 750,000 Energy 500,000 Savings Baseline Period Reporting Period 250,000 Metered Energy22
  • 23. INTERNATIONAL PERFORMANCE MEASUREMENT AND VERIFICATION PROTOCOL › The most known protocol on M&V › Produced and disseminated by the Efficiency Value Organization › Can be downloaded for free from EVO www.evo-world.org23
  • 24. 5. ESCO: Different Models24
  • 25. ESCO: DIFFERENT MODELS › Utility-based ESCO (the cases of Croatia and Uruguay) › Government-based ESCO (the case of India) › Private sector ESCO (the case of China)25
  • 26. ESCO: UTILITY BASED ESCO › Utility-based ESCO (the cases of Croatia and Uruguay) › Owned by Utility › Targeted sectors: all sectors but mainly focusing on government facilities and institutions (schools, offices, universities, hospitals, industries, etc) › Maximum payback period : Variable, Private 5 years, Public 8 years(Croatia) › Project’s range: USD 100,000 to 2 Million (Croatia) › Utility financing: › Croatia : 7 million › Uruguay: 7.1 million26
  • 27. ESCO: UTILITY BASED ESCO › Advantages › Client data base available › Available financing source › Easy access to clients › Client trust utility › Access to all sectors especially government › Disadvantages: › Not flexible and could not follow the fast changes as it is a part of big system › Difficulties to stimulate staff27
  • 28. ESCO: GOVERNMENT BASED ESCO › Government-based ESCO (EESL: the case of India) › Established by Government to facilitate implementation of energy efficiency projects › Targeted sectors: Demand Side Measures including municipal functions, agriculture, public building, lighting etc. › EESL work as ESCO, as Consultancy Organization for CDM, as a Resource Centre for capacity building of State Designated Agencies, Utilities, financial institutions, etc.28
  • 29. ESCO: GOVERNMENT BASED ESCO › Advantages › facilitate preparation of energy efficiency projects › Partner with private ESCO’s and other companies to promote energy efficiency. › Assists and help for project financing › Capacity development and activities support to potential ESCOs in the market › Disadvantages: › Longer delay for project development and implementation › Rigid procedure29
  • 30. ESCO: PRIVATE SECTOR ESCO › Private sector ESCO (the case of China) › Owned by private companies: vendors of energy- efficient equipment or subsidiaries, companies with innovative proprietary technology, companies with special skills in diagnosis of energy efficiency. Some ESCOs have evolved from local energy conservation technical centers, etc › Targeted sectors: industrial enterprises are the dominant clients with building sector and commercial › Payback period : The focus on commercial clients has helped lead to a fast-paced business centering on projects which can conclude within three years or less › Number: registered ESCOs in China reached over 900 by the end of 201030
  • 31. ESCO: PRIVATE SECTOR ESCO › Advantages › Very flexible EPC following client criteria › Ability to develop and adjust to a win-win approach › Full services project or focus on a single technology or system renovation › Disadvantages: › Required important fianancial capacity › Limited access to gouvernement facilities › Limited support form governemental institutions31
  • 32. 6. EPC: Public procurement32
  • 33. PUBLIC PROCUREMENT FOR EPC Although EPC may be well suited to address the challenges of improving public sector energy efficiency, rigid administrative systems are quite poorly suited to efficient procurement of energy services Helping public agencies manage the EPC process is a difficult task Solutions must be country specific33
  • 34. PUBLIC PROCUREMENT FOR EPC A COMPLEX ISSUE HTTP://www.esmap.org/filez/news/72720091058 11_P2E2_presentation_REV_3.pdf34
  • 35. 7. Conclusion35
  • 36. CONCLUSION: IS EPC IS THE SOLUTION FOR EE? Limitation of the concept › Size is an issue › Credit risk in the private sector is a limitation Focused Markets › Public sector has always been the favorite › Limited use in the industrial sector Case studies › Successes: Canada, China, Croatia, Germany › Failures: Egypt, Tunisia, Poland › Mixed successes: Brazil, India36
  • 37. THANK YOU Pierre Langlois President Econoler planglois@econoler.com37

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