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- 11. !!! !11! improvement!measures!in!a!final!customer’s!facility!or!premises”!(“Energy!Efficiency! Directive,”!n.d.).!! ! Different!types!of!organisations!perform!the!role!of!an!ESCO.!In!the!UK!the!major!players! are!considered!to!be!large!international!manufacturers!of!building!automation!and! controls!systems,!energy!service!and!supply!companies!and!facility!management! companies.!ESCO’s!are!typically!involved!with!a!variety!of!activities!that!include! (Bertoldi!et#al.,!2013):! ! • Energy!management! • Energy!analysis!and!audits! • Project!design!and!development! • Maintenance!and!operation! • Monitoring!and!evaluation!of!savings! • Property/facility!management! • Energy!and/or!equipment!supply! • Provision!of!service!(space!heating/cooling,!lighting,!etc)! • Training! ! In!terms!of!this!research!the!beneficiary!would!be!a!University!or!another!Public!Sector! Organisation.!The!EPC!would!typically!involve!the!ESCO!identifying!energy!efficiency! improvements!for!the!University!through!an!energy!audit!of!its!facilities!identifying!an! agreed!level!of!resulting!energy!or!cost!savings.!In!most!cases!the!EPC!would!take!the! form!of!one!of!two!ESCO!contracts.!!Firstly,!a!shared!savings!model,!where!the!ESCO!and! customer!share!the!utility!bill!savings!generated!by!the!energy!efficiency!improvements,! with!the!share!to!both!parties!confirmed!in!the!EPC!(Clinton!Climate!Initiative,!2009a).! In!this!instance,!the!ESCO!provides!the!finance!and!the!customer’s!only!financial! obligation!is!to!pay!a!share!of!the!materialized!savings!to!the!ESCO!over!an!agreed! period!(Pätäri!&!Sinkkonen,!2014).!Secondly,!a!guaranteed!savings!model!where!the! ESCO!guarantees!that!the!project!will!result!in!a!specified!reduction!in!energy!use! usually!measured!in!kilowatt!hours!(kWh)!over!the!contract!period.!Where!the! reduction!in!energy!use!is!not!realized!the!ESCO!is!obliged!to!pay!the!client!the!shortfall! using!utility!rate!calculations!agreed!within!the!contract!(Clinton!Climate!Initiative,! 2009a).!For!the!guaranteed!savings!model,!it!is!the!client!who!typically!provides!the!
- 12. !!! ! 12! financing!with!the!guarantee!from!the!ESCO!used!to!cover!financial!and!performance! risk!(Pätäri!&!Sinkkonen,!2014)! ! Figure!2!Q!Basic!Concept!of!Energy!Performance!Contract!(Xu!et#al,!2011)! ! ! Figure!2!illustrates!the!basic!principle!of!an!EPC.!During!the!EPC!the!resulting!energy! savings!in!utility!costs!are!used!to!covering!the!costs!of!the!contract!with!a!surplus! available!to!the!customer!(guaranteed!savings!model)!or!shared!between!the!ESCO!and! customer!shared!savings!model).!After!the!EPC,!all!the!savings!are!available!to!the! customer.!EPC!contract!length!can!vary!considerably!but!tend!to!be!between!5!and!20! years!(Steinberger!et#al,!2008)! ! Figure!3!Q!Financing!investments!within!energy!service!contracts.!Based!on!Sorrell!(2007)! ! ! Figure!3!gives!an!overview!of!the!different!considerations!for!a!guaranteed!savings! model,!where!the!customer!will!use!its!own!funding!or!source!finance!from!a!third!party! and!a!shared!savings!model!where!the!ESCO!sources!the!funding!themselves.!Whereas! the!ESCO!will!mainly!assume!performance!risk!in!the!guaranteed!savings!model,!it!will! also!take!on!the!financial!risk!with!a!shared!savings!model.!However!the!shared!savings! Cost%Savings Cost%Savings EPC%Payments Utility%Costs Utility%Costs Utility%Costs Before%EPC During%EPC After%EPC Client'Finances'the'Investment' ESCO'finances'the'investment'through'debt'or'leasr Client'has'separate'contracts'with'ESCO'and'finance'company Client'has'single'contract'with'ESCO,'ESCO'has'separate'contract'with'finance'company Asset'appear's'on'customer's'balance'sheet Asset'appears'on'ESCO's'balance'sheet ESCO'assumes'performance'risk ESCO'assumes'both'performance'and'credit'risk Lower'cost'of'capital Higher'cost'of'capital Higher'proportion'of'energy'cost'savings'to'customer Lower'proportion'of'energy'cost'savings'to'customer Lower'proportion'of'cost'savings'to'ESCO Higher'proportion'of'cost'savimgs'to'ESCO Increases'financial'risk'to'cusomer' Increases'financial'risk'to'ESCO
- 14. !!! ! 14! technologies!to!be!installed!and!costs.!Due!to!the!commitment!from!the!ESCO!at!this! point!compensation!is!typically!agreed!if!the!customer!decides!not!to!go!through!with! the!EPC.!The!EPC!is!then!signed!and!projects!implemented.!If!monitoring!and! verification!is!included!in!the!contract!then!the!customer!will!track!the!performance!of! the!energy!efficiency!measures!with!the!ESCO,!with!the!ESCO!obliged!to!cover!any! shortfall!in!savings.! Literature!Review! Sources!of!University!GHG!emissions! ! This!research!will!focus!on!University!scope!1!and!2!emissions,!which!amounted!to! approximately!2.3!MtCO2e!in!2012/13!(HESA,!2013).!As!far!as!UK!Universities!are! concerned!these!are!mainly!associated!with!buildings’!energy!use.!As!Figure!5!shows!the! vast!majority!of!these!emissions!came!from!grid!electricity!(57%)!and!the!burning!of! natural!gas!(35%)!with!most!of!the!remainder!from!vehicle!use.!83%!of!total!scope!1! and!2!emissions!occurred!within!the!nonJresidential!estate,!such!as!research!and! teaching!facilities!with!17%!from!residential!sources!such!as!student!accommodation.!! ! HEFCE!are!encouraging!Universities!to!measure!scope!3!emissions!as!part!of!their! carbon!management!process.!These!emissions!cover!all!indirect!emissions!from!an! organisation’s!activities!such!as!its!supply!chain!and!business!travel!(Carbon!Trust,!n.d.J c).!It!should!be!noted!that!these!emissions!will!be!significant!for!Universities!estimated! at!approximately!30%!of!total!emissions!for!the!sector!in!2006!(HEFCE,!n.d.Jf)!and!can! contribute!to!80%!of!an!organisation’s!total!emissions!(OzawaJMeida!et#al,!2013)! ! Figure!5!Q!Summary!of!UK!University!scope!1!and!2!emissions!(2012/13)! ! ! Carbon!Reduction!within!the!HE!Sector! ! Total scope 1 and 2 (tCO2e) Scope 1 and 2 carbon emissions natural gas (tCO2e) Scope 1 and 2 carbon emissions grid electricity (tCO2e) Scope 1 and 2 carbon emissions vehicles diesel (tCO2e) Scope 1 and 2 carbon emissions vehicles petrol (tCO2e) Non-residential scope 1 and 2 carbon emissions total (tCO2e) Residential scope 1 and 2 carbon emissions total (tCO2e) 2,314,652 815,255 1,328,895 14,216 1,582 1,929,510 418,010
- 17. !!! !17! Benefits!of!Energy!Performance!Contracting! ! Pätäri!&!Sinkkonen!(2014)!compare!the!typical!Energy!Performance!Contract!model! with!the!Hamel!Business!model!framework!and!consider!ESCO!/EPC’s!to!have!a!strong! core!strategy,!a!unique!financing!option!offering!differentiation!and!a!clear!and!relevant! business!mission.!They!also!point!to!direct!benefits!from!reduced!energy,!operating!and! maintenance!costs!and!indirect!advantages!such!as!improved!productivity,!higher! comfort!levels!and!environmental!improvements.!In!addition,!outsourcing!of!EPC’s!can! allow!clients!to!focus!on!core!activities.!! ! BleylJAndroschin!&!Schinnerl!(2010)!echo!the!same!benefits!of!outsourcing!and!state! that!if!implemented!correctly!EPC’s!have!delivered!guaranteed!savings!successfully!in! Europe!since!the!1990’s.!They!identify!a!successful!EPC!as!a!“win!win”!for!all!parties! involved.!Key!advantages!for!building!owners!include:!the!guarantees!over!the!full! contract!term!with!technical!and!commercial!risks!shifted!from!the!client!to!the!ESCO! and!increasing!the!comfort!and!value!of!the!building.! ! Sorrell!(2007)!examines!the!economics!of!energy!service!contracting!and!sees!the!model! as!a!potentially!cost!effective!method!to!overcome!barriers!to!energy!efficiency,!enabling! clients!to!reduce!operating!costs,!transfer!technical!and!financial!risks!and!concentrate! on!core!activities.! ! Figure!6!illustrates!a!general!comparison!of!risk!sharing!associated!with!various!forms! of!energy!efficiency!investments!for!a!University!(HEI),!indicating!that!the!greatest!risk! is!absorbed!by!an!ESCO!and!largest!cost!reduction!achieved!through!an!EPC!(Bertoldi!et! al.,!2013).!! ! Figure!6!Q!Risk!Comparison!for!Energy!Efficiency!Investments!Based!on!ESCO!Market!Report!2013! (Bertoldi!et!al.,!2013)! ! ! Balance'Sheet' Investment'Risk Operational'Risk Credit'Risk Inflation'/'Exchange'Rate'Risk User'Behaviour'Risk Total'Costs HEI'Own'Investment HEI HEI HEI Bank HEI HEI 3rd'Party'Financing ESCo+ ESCo HEI ESCo ESCo/HEI HEI ESCo/EPC ESCo/HEI ESCo/HEI ESCo ESCo ESCo HEI
- 19. !!! !19! Figure!7!Q!Summary!of!UK!EPC!Case!Study!Information! ! Organsisation Sector Program Project0Cost No.0of0 Buildings Energy0Savings Cost0Savings CO20Savings tCO20pa0saved Payback0(yrs) DECC Central*Government RE:FIT £550,000 2 15% 159 12 Camden*Council Local*Authority RE:FIT £1,400,000 17 970 5 Tower*Hamlets*College Local*Authority RE:FIT £900,000 26% 440 15 LSE University RE:FIT £2,300,000 18% 8574 7 London*Borough*of*Sutton Local*Authority RE:FIT £1,065,000 10 20% 846 7 Kew*Gardens NonSdepartmental* Governmental*Body RE:FIT £690,000 7% 6% 760 6 London*Borough*of*Enfield Local*Authority RE:FIT £1,700,000 14 21% 1700 7 London*Borough*of*Harrow Local*Authority RE:FIT £1,000,000 8 38% 685 9.5 Olympic*Development*Authority NonSdepartmental* Governmental*Body RE:FIT £550,000 12 31% 35% 701 4 Waltham*NHS NHS RE:FIT £126,000 8 10% 13% 139 5.5 Goldsmiths University RE:FIT £6,000,000 47% 3000 12 London*Borough*of*Ealing Local*Authority RE:FIT £1,040,000 3 28% 30% 5 Newham*Hospital*NHS NHS RE:FIT £433,000 1 10% 9% 732 5 TFL Local*Government*Body RE:FIT £3,904,000 22 16% 16% 2500 8 London*Fire*and*Emergency*Planning Fire*Authority RE:FIT £2,079,000 30 20% 17% 10 University*of*Sheffield University n/a £3,800,000 25% 1680 10 Southport*Hospital NHS CEF £2,200,000 1650 Royal*Free*Hospital NHS CEF £1,540,000 Natural*History*and*V&A*Museums Museums CEF £5,500,000 3500 Royal*Berkshire*Hospital NHS CEF £3,300,000 19% 2842 Arrowe*and*Clatterbridge*NHS NHS CEF £6,300,000 30% 6200 Addenbrookes*Hospital NHS CEF £36,000,000 47% 25000 Yeovil NHS CEF £2,700,000 1700 Gwent*NHS NHS n/a £6,500,000 20% Strand*Palace*Hotel Private*Sector n/a £500,000 1 25% Mid*Devon*District*Council Local*Authority n/a 3 28% 691 Leeds*City*Council Local*Authority RE:FIT £1,200,000 20% 1317 Princess*Royal*Hospital NHS CEF £1,440,000 Blackpool*Hospital NHS CEF £1,520,000 Kingston*Hospital NHS CEF £455,000 Birmingham*Heartlands NHS CEF £403,000 Royal*Shewsbury NHS CEF £547,000 Crawley*Hospital NHS CEF Glan*Hafren*Hospital NHS CEF £4,000,000 Cheltenham*and*Gloucester*NHS NHS CEF £3,100,000 40% 30% Wirral*NHS NHS CEF £6,300,000 Bath*Spa*University University CEF £2,000,000 20% 900 St*George's*Teaching*Hospital University LEEF 1 25% 6000
- 20. !!! ! 20! ! Figure!8!Q!Averages!for!EPC!Case!Study!Projects! ! ! The!benefits!of!EPC’s!identified!in!the!literature!review!are!summarized!in!Figure!9! including!advantages!for!ESCOs!and!the!local!area!and!economy!(Bertoldi!et!al.,!2013).!! ! Figure!9!Q!Summary!of!Advantages!of!ESCO!Model.!Based!on!ESCO!Market!Report!2013!(Bertoldi!et! al.,!2013)! ! Barriers!to!Energy!Performance!Contracting! ! Figure!10!summarizes!a!review!of!the!most!commonly!stated!barriers!to!the!expansion! of!the!ESCO/EPC!market!and!their!proposed!solutions.!A!consistent!theme!is!that!there! is!often!unfamiliarity!of!the!business!model!stemming!from!a!lack!of!information!which! in!turn!leads!to!uncertainty!and!mistrust!for!potential!clients!and!financial!institutions.!! For!banks!this!lack!of!information!has!meant!that!EPC’s!can!be!considered!too!risky!with! conservative!methods!of!lending!preferred.!For!customers!without!sufficient!supporting! information!an!EPC!can!be!perceived!as!too!much!of!a!technical!and!business!risk!and! may!be!considered!less!of!a!priority!than!other!investments,!especially!when!energy! spend!may!be!a!small!proportion!of!aggregate!production!costs.!Suggested!solutions! include!demonstration!of!successful!projects,!standardization!of!contracts!and! Average'Project'Cost Average'Energy'Savings Average'Cost'Savings Average'tCO2'pa'savings Average'Payback Average'cost'per'tCO2'saved £3,229,771 27% 19% 22% 8.00 £1,140 University Municipality/Community ·"""""""Energy"cost"reduction ·"""""""Jobs ·"""""""No"or"low"up"front"cost ·"""""""Growth"of"building"stock/"more"attractive"area ·"""""""Transfer"of"technical"and"commercial"risks ·"""""""Healthier"district ·"""""""Multiple"projects"under"one"contract ·"""""""Independency ·"""""""Increased"comfort"levels"/"healthier"""environment ·"""""""Development"of"communities ·"""""""Building"value"increase ·"""""""Aesthetics"/"Status"improvements ·"""""""Public"image ESCO Macro7economy ·"""""""Profit ·"""""""Jobs ·"""""""Workplace ·"""""""Growth"of"GDP ·"""""""LongJterm"partnership ·"""""""Motivation"for"investors"to"spend"money"locally ·"""""""Possibility"of"further"contracts"with"HEI ·""""""Growth"of"energy"security,"decrease"need"for
- 21. !!! !21! monitoring!and!verification!protocols!supported!by!an!ESCO!association!to!help! dissemination!of!information.!In!addition,!ESCO!accreditation!is!considered!to!build! confidence!within!the!market.!Consultancy!to!support!the!full!EPC!project!lifecycle!has! been!suggested!to!ease!customer!resources!and!deal!with!potential!complexities.!A! governmental!“Super!ESCo”!is!suggested!as!a!possible!solution!to!support!customers’! project!development!from!a!selected!framework!of!EPC!suppliers!(Fang!et#al.,!2012)!.! ! Unfavourable!procurement!rules!for!EPC’s!are!identified!as!an!issue!within!the!Public! Sector,!as!tendering!procedures!often!focus!on!best!price!rather!than!full!lifecycle!costs! of!equipment!(UrgeJVorsatz!et!al,!2007).!It’s!also!suggested!that!transaction!costs!for! public!procurement!can!be!reduced!by!standardization!of!tendering!processes!for!EPC’s! (Sorrell,!2007).! ! Market!factors!such!as!low!energy!prices!and!high!costs!for!energy!efficiency! technologies!can!lengthen!project!paybacks!and!drive!up!transaction!costs.!These!factors! can!be!influenced!by!stricter!GHG!regulatory!policies!and!carbon!taxes!to!support! environmental!agendas!and!the!cost!effectiveness!of!energy!efficiency!investments! (Steinberger!et!al,!2008)! ! Figure!10!Q!Summary!of!barriers!and!solutions!included!in!Literature!Review! Barrier! Solution! Authors! ! Low!awareness!and!lack! of!information!of!ESCO! model!among!clients!and! financial!organisations! ! • Demonstration!programs! • Model!contracts! • Standardization!of!monitoring! and!verification!protocol! • Dissemination!of!information!! • Partnerships! ! ! (Vine,!2005)! (ÜrgeJvorsatz!et!al.,!2007)! (Sorrell,!2007.)! (Pätäri!&!Sinkkonen,!2014)! (Hannon!et!al.,!2013)! ! ! ! A!lack!of!confidence!in! ESCO’s!i.e!short!track! record!and!poor!early! performance! ! • !Accreditation!schemes! • ESCO!associations! • Standardization!of!monitoring!&! verification!protocols!and! control!procedures! • Model!contracts! ! ! (Marino!et!al.,!2011)! (Vine,!2005)! ! ! ! Unfavourable!legal! frameworks!and!public! ! ! • Standardisation!of!tendering! and!procurement!procedures! ! ! (Marino!et!al.,!2011)! (Sorrell,!2007)!
- 22. !!! ! 22! procurement!rules! ! ! ! Low!energy!prices! increasing!project! paybacks! ! ! • Stricter!GHG!regulation! • Environmental!taxes! ! (Steinberger!et!al.,!2008)! (Vine,!2005)! ! Lower!priority!given!to! energy!efficiency! improvements!than! other!investments! ! ! • Demonstration!programs! • Dissemination!of!information! • e/e!obligations! ! !!!!!!!!!!!!! ! !!!!!!!!!!!!!(ÜrgeJvorsatz!et!al.,!2007)! ! ESCO’s!not!interested!in! smaller!projects!due!to! high!transaction!costs! ! ! • Project!Bundling! • Governmental!support! ! ! !!!!!!!!!!!!!(ÜrgeJvorsatz!et!al.,!2007)! ! High!perceived!technical! and!business!risk! ! • ESCO!accreditation! • Demonstration!programs! • Standardization!of!contracts!and! procedures! ! ! ! (ÜrgeJvorsatz!et!al.,!2007),! (Pätäri!&!Sinkkonen,!2014)! ! Concern!over!complexity! of!projects!i.e!baseline! data!and!long! preparation!time! ! ! • Consultancy! • Project!support!from!“Super! ESCO”! ! (Sorrell,!2007)! (Fang!et!al.,!2012.)! (Pätäri!&!Sinkkonen,!2014),!! (ÜrgeJvorsatz!et!al.,!2007)! ! ! Banks!not!willing!to!lend! for!EPC!i.e!too!risky!or! conservative!banking! practices! ! • Demonstration!programs! • Climate!orientated!political! commitment!and!related! regulatory!framework! ! ! (Bertoldi!et!al.,!2013),!! (ÜrgeJvorsatz!et!al.,!2007)! ! ! Barriers!to!EPCs!in!the!UK! ! Bertoldi!et#al#(2013)!note!that!lack!of!awareness!and!trust!is!an!issue!for!the!UK!ESCO! market!due!to!confusion!over!the!business!concept!and!variance!of!EPC!contracts.!They! point!to!work!by!associations!such!as!ESTA!and!the!Energy!Managers!association!to! disseminate!information!as!well!public!demonstration!projects!through!programs!such! as!the!Mayor!of!London’s!RE:FIT!scheme!(RE:FIT,!n.d.Jb).!
- 24. !!! ! 24! Sorrell!(2007)!identifies!a!hypothesis!involving!a!number!of!independent!variables!that! directly!influence!the!viability!of!an!energy!service!contract!and!can!applied!to!this! research.!In!this!hypothesis!energy!service!contracting!is!most!(least)!likely!to!be!used!in! situations!where:! ! o Technical!potential!for!production!cost!savings!included!within!the!contract!are! large!(small);! o Aggregate!production!costs!for!all!energy!services!within!the!client!organization! are!small!(large);! o Specificity!of!assets!required!to!provide!the!energy!services!are!low!(high);! o Task!complexity,!as!measured!by!the!difficulty!in!specifying!and!monitoring! contractual!terms!and!conditions!is!low!(high);! o Market!for!energy!service!contracts!is!more!(less)!competitive;! o The!relevant!institutional!framework!is!more!(less)!conducive!to!contracting! ! This!forms!a!basis!with!which!to!assess!the!suitability!of!an!energy!performance! contract!for!a!UK!University.!An!ideal!organization!could!be!one!where!there!is!potential! for!energy!conservation!measures!to!deliver!large!energy!cost!savings!but!where!the! total!energy!bill!forms!a!small!proportion!of!the!total!aggregate!expenditure!and!inJ house!resource!to!deliver!the!required!measures!is!low.!An!EPC!may!be!more! appropriate/feasible!if!the!energy!saving!measures!are!not!highly!specialized!as!ESCO! expertise!tends!to!focus!on!generic!technologies!such!as!CHP,!Building!Management! Systems!(BEMS)!and!lighting.!The!greater!the!task!complexity!in!both!technical!and! contractual!terms!may!push!up!transactions!costs!such!as!legal!and!consulting!fees! lessening!the!benefits!of!production!cost!reductions.!Sorrell!(2007)!believes!an! organization!is!more!likely!to!keep!transactions!costs!lower!and!achieve!better!value! when!the!bidding!process!is!more!competitive.!Finally,!he!suggests!that!EPC’s!are!more! likely!to!be!considered!if!the!institutional!framework!is!supportive,!through! standardized!procurement!processes!and!model!contracts!for!example.!! ! The!Clinton!Climate!Initiative!provide!a!concept!stage!questionnaire!for!EPC’s!as!part!of! their!EPC!Toolkit!for!Higher!Education!(Clinton!Climate!Initiative,!2009b).!This!has! proved!useful!to!help!construct!the!questions!for!an!online!survey!for!this!research!and! to!understand!the!general!conditions!that!an!EPC!may!be!most!suitable!for!a!University.! The!initial!part!of!the!questionnaire!focuses!on!the!age!and!condition!of!the!building! envelope,!lighting,!HVAC!and!building!management!systems!(BEMS)!and!potential!
- 29. !!! !29! In!total,!representatives!from!32!English!Universities!and!1!from!Scotland!completed!the! survey.!In!the!context!of!English!Universities!this!represents!25%!of!total!of!129! organisations!(HESA!n.d.).!!The!breakdown!of!respondents’!Job!Titles!and!Organisation! Type!is!shown!in!Figure!13!and!is!broadly!representational!of!the!University!sector!as!a! whole.!The!largest!groups!of!responses!came!from!Energy!Managers!(38%),!second! were!Sustainability!Managers!and!Directors!(19%)!and!third!were!from!Director/Head! of!Estates!(13%).! ! Figure!13!Q!Online!Survey!Respondents!Job!Titles!and!University!Types! University Type Job Title Pre 1992 Director of Estates Post 1992 Director of Estates Pre 1992 Director of Estates and Facilities Post 1992 Doctoral Researcher Post 1992 Energy & Environment Manager Post 1992 Energy and Carbon Reduction Manager Post 1992 Energy and Environment Manager Pre 1992 Energy and Utilities Manager Post 1992 Energy Carbon Manager Post 1992 Energy Engineer Post 1992 Energy Engineer Pre 1992 Energy Manager Pre 1992 Energy Manager Pre 1992 Energy Manager Post 1992 Energy Manager Pre 1992 (Russell Group) Energy Manager Pre 1992 Energy Officer Post 1992 Energy Officer Pre 1992 Energy Sustainability Manager Pre 1992 (Russell Group) Environment & Energy Manager Post 1992 Environmental Manager Pre 1992 (Russell Group) Head of Energy & Sustainability Pre 1992 (Russell Group) Head of Energy and Environment Pre 1992 (Russell Group) Head of Environment and Energy Pre 1992 (Russell Group) Head of Environmental Sustainability Pre 1992 (Russell Group) Head of Facilities Maintenance & Design Post 1992 Senior Energy Engineer Post 1992 Senior Projects Manager Post 1992 Sustainability Manager Pre 1992 Sustainability Manager Post 1992 Sustainability Manager Post 1992 Sustainability Director
- 31. !!! !31! Figure!14!Q!Summary!of!Interview!Participants!and!Interview!Type! Sector! Representative! ! Interview!Type! Central!Government! Representative!for!the! Department!of!Energy!and! Climate!Change!(DECC)! Face!to!face! HE!Sector!Organisation! Sustainability!Manager! Telephone! Public!Sector!EPC!Scheme! Program!Director! Face!to!face! University!! Two!Energy!and!Sustainability! Managers!from!separate!HEI’s! Face!to!face! University!(Russell!Group)! One!Head!of!Sustainability! Telephone! University!! One!Energy!Manager! (undertaking!an!EPC)! Telephone! University!! One!Vice!Chancellor! Telephone! ESCO!! Two!separate!ESCO!suppliers! Face!to!face! NHS! Two!Energy!and!Sustainability! managers!from!separate!NHS! Trusts!in!the!process!of!an!EPC! Face!to!face! Local!Authority! Project!Director!(undertaking!a! EPC)! Telephone! Trade!Association! Chairman! Telephone! ! Interview!Design! ! For!interviews!with!University!Energy!and!Sustainability!Managers!the!same!questions! included!the!online!survey!were!used!but!treated!as!open!ended!without!a!multiple! choice!of!answers!suggested.!This!was!to!understand!in!more!depth!and!detail!the! reasoning!and!to!avoid!leading!the!questioning.! ! For!the!other!organizations!the!same!format!of!questioning!would!not!be!appropriate! and!questions!were!adapted!as!required,!see!Figure!15.! ! ! ! ! ! ! ! ! ! !
- 32. !!! ! 32! Figure!15!Q!Overview!of!Interview!Structure! Participant! Context! Interview!Structure! ! DECC! ! Perspective!on!EPC’s!from!Central! Government! ! • Where!do!EPC’s!fit!within! DECC’s!overall!energy! efficiency!strategy?! ! ! HEFCE! ! Drivers!for!carbon!reduction!with!HE! Sector!/!Performance!to!Date!/! HEFCE’s!planned!carbon!reduction! initiatives! ! • How!have!Universities! performed!in!term!of!carbon! reduction!targets!since! 2010?! • What!future!carbon! reduction!initiatives!are! planned!by!HEFCE?! • What!are!the!main!drivers! for!energy!efficiency!for! Universities?! • What!are!the!most!common! barriers!to!implementing!e/e! measures?! • What!is!HEFCE’s!awareness! /!position!on!EPCs?! ! ! Non!Governmental!“Super!ESCO”! ! Perspective!on!the!suitability!of!EPC’s! from!a!third!party!program!provider! ! • What!are!the!characteristics! of!an!ideal!candidate!for!an! EPC?! • What!have!been!the!barriers! for!uptake!of!EPC’s!?! • Most!favourable!aspects!of! EPC’s!from!a!customer’s! point!of!view?! • Who!are!the!key!decision! makers!from!a!customer’s! perspective?! • What!are!the!benefits!of!3rd! party!support?! ! ! NHS! ! Perspective!from!a!Public!Sector!EPC! customer! ! • What!are!your!organisation’s! carbon!reduction!targets?! • Why!did!you!choose!an!EPC?! • Who!initiated!the!process?! • Did!you!encounter!any! barriers!during!the!EPC! process?!
- 33. !!! !33! • What!level!of!savings!are!you! expecting?! • What!recommendations!do! you!have!for!future!EPC! customers?! ! ! ESCO!Supplier! ! Perspective!from!EPC!supplier! ! • How!do!you!qualify!an!EPC! opportunity!initially?! • What!is!the!typical!project! size!?! • What!are!drivers!for!an!EPC! from!a!customer’s! perspective?! • What!are!the!characteristics! of!an!ideal!EPC!from!your! perspective?! • What!are!the!main!barriers! for!uptake!of!EPC’s?! • What!are!your! recommendations!to! improve!expansion!of!the! business!model?! ! ! Local!Authority! ! Perspective!from!a!Public!Sector!EPC! customer! ! • What!are!your!organisation’s! carbon!reduction!targets?! • Why!did!you!choose!an!EPC?! • Who!initiated!the!process?! • Did!you!encounter!any! barriers!during!the!EPC! process?! • What!level!of!savings!are!you! expecting?! • What!recommendations!do! you!have!for!future!EPC! customers?! ! Case!Study!Analysis! ! Detailed!project!figures!in!terms!of!contractual!details!and!actual!savings!achieved!were! considered!to!be!difficult!to!obtain!given!their!understandably!sensitive!nature!from!the! point!of!view!of!the!customer!and!ESCO!suppliers.!For!this!reason!and!due!to!time! limitations!a!review!of!EPC!case!studies!was!carried!out!identifying!37!examples!
- 35. !!! !35! 2. Exclude!Universities!with!total!electricity!consumption!of!<1,000,000!kWh,!in! line!with!minimum!criteria!for!an!EPC!from!an!ESCO’s!perspective!identified!in! interviews.! ! 3. Sort/prioritise!the!data!by!“Number!of!Sites”!then!by!“Grid!Electricity!per!Site”!in! line!with!AECPA!scoring!for!higher!electricity!consumption!for!fewer! sites/buildings.! ! 4. Highlight!which!Universities!do!not!have!CHP!to!consider!this!option!as!an! energy!efficiency!measure! ! Note#:##Some#Universities#may#be#found#lower#on#the#list#as#they#have#a#number#of# sites#but#consumption#may#be#concentrated#on#only#one#or#two#campuses# indicating#suitability#for#an#EPC.# ! Figure!16!shows!the!outcome!of!Stage!1!targeting!the!first!40!Universities!matching!the! relevant!criteria.!In!terms!of!validating!the!process,!none!of!the!Universities!who! considered!the!EPC!model!as!“Unsuitable”!during!the!online!survey!fell!into!this!group.! Furthermore!three!organisations!who!are!publicly!engaged!in!an!EPC:!LSE,!St!George’s! Teaching!Hospital!and!Goldsmiths!are!in!this!selection!and!six!Universities!who! considered!the!model!as!“Suitable”!or!who!had!considered!an!EPC!but!are!undecided!are! included.!! ! In!addition,!Figure!33!summarises!key!characteristics!of!the!Universities!whose! representatives!responded!that!that!EPC’s!would!be!‘suitable’!or!‘unsuitable’!for!their! organization!in!the!online!survey.!The!findings!support!the!suitability!tool!by!showing! that!on!average!the!‘suitable’!responses!come!from!Universities!with!fewer!sites!with!a! higher!concentration!of!electricity!use!per!site!than!the!‘unsuitable’!responses.!This!is! discussed!in!more!detail!within!Research!Findings.! ! ! ! ! ! ! ! ! !
- 36. !!! ! 36! Figure!16!Q!EPC!Suitability!Tool!for!UK!Universities.!Based!on!Estates!Management!Data!(HESA,!2013)! ! ! Stage!2!! ! Completion!of!the!below!questionnaire!based!on!the!Clinton!Climate!Change!Initiative! guidance!for!Energy!Performance!Contracting!for!US!Universities!(Clinton!Climate! Initiative,!2009b).!Where!any!answer!is!“No”!consideration!can!be!given!for!an!EPC.! ! ! ! ! ! Region of institution SWES LOND SEAS LOND SCOT EMID EAST EMID SWES LOND LOND SCOT SWES SCOT LOND EAST LOND SWES NWES WMID YORH WMID LOND EMID NWES Number of sites 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 Grid Electricity per site (kWh) 27,179,989 24,746,993 22,767,551 21,049,391 17,861,011 17,732,777 16,841,084 14,593,747 13,797,364 13,429,058 8,104,114 4,545,452 3,109,442 3,087,163 2,909,094 2,868,608 2,229,755 2,220,159 2,003,308 1,849,459 1,660,633 1,522,965 1,447,602 1,340,801 1,197,161 Total energy consumption (kWh) 69,327,635 68,004,171 73,655,139 44,036,998 52,293,061 96,430,741 84,131,870 32,951,429 25,146,348 35,826,828 12,291,294 12,924,956 9,720,858 6,308,379 3,822,919 6,125,881 2,237,992 4,351,205 4,744,155 9,869,802 8,275,217 4,121,878 3,552,114 4,001,729 2,921,229 Energy consumption natural gas used as input for a CHP unit (kWh) Energy consumption grid electricity (kWh) 2,525,162 27,179,989 0 24,746,993 15,546,484 22,767,551 150,771 21,049,391 0 17,861,011 33,923,359 17,732,777 75,220,165 16,841,084 0 14,593,747 2,742,253 13,797,364 444,001 13,429,058 0 8,104,114 0 4,545,452 0 3,109,442 0 3,087,163 0 2,909,094 0 2,868,608 1,622,774 2,229,755 0 2,220,159 0 2,003,308 0 1,849,459 2,076,819 1,660,633 0 1,522,965 0 1,447,602 0 1,340,801 0 1,197,161 SEAS SEAS WMID NWES LOND YORH WMID LOND WMID SCOT NWES SCOT LOND LOND WMID 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 10,394,947 9,242,850 8,251,356 7,604,937 7,109,115 6,551,299 6,488,031 5,950,619 5,909,111 5,825,093 5,617,324 5,343,873 4,899,274 3,557,149 3,060,499 55,924,489 59,815,508 36,455,838 59,352,781 23,988,074 28,562,083 48,200,512 23,388,550 44,358,671 25,688,242 33,298,045 34,956,139 20,635,680 22,170,103 38,262,313 0 20,789,893 213,064 18,485,699 0 16,502,712 22,455,111 15,209,874 7 14,218,229 0 13,102,598 15,073,048 12,976,062 0 11,901,237 0 11,818,221 0 11,650,185 0 11,234,647 0 10,687,746 1,338,526 9,798,548 0 7,114,298 35,140,996 6,120,997
- 38. !!! ! 38! ! o Technical!potential!for!production!cost!savings!included!within!the!contract!are! large!(small);! o Aggregate!production!costs!for!all!energy!services!within!the!client!organization! are!small!(large);! o Specificity!of!assets!required!to!provide!the!energy!services!are!low!(high);! o Task!complexity,!as!measured!by!the!difficulty!in!specifying!and!monitoring! contractual!terms!and!conditions!is!low!(high);! o Market!for!energy!service!contracts!is!more!(less)!competitive;! o The!relevant!institutional!framework!is!more!(less)!conducive!to!contracting! Research!Findings! UK!University!Carbon!Reduction!Targets!and!performance!to!date! ! HEFCE!(HEFCE.b,!nd)!issued!a!carbon!reduction!strategy!for!the!English!HE!sector!in! 2010,!requiring!each!University!to!identify!an!absolute!reduction!target!for!scope!1!and! 2!emissions!(tCO2e)!by!2020!based!on!a!2005!baseline,!as!well!as!the!completion!of! carbon!management!plans.!The!submissions!resulted!in!a!collective!impact!of!38%! contributing!to!an!overall!carbon!reduction!target!for!the!sector!of!43%!over!the!same! period!(HEFCE.a,!n.d.).!! ! The!Higher!Education!Statistic!Agency!(HESA)!collects!and!publishes!University!Estates! data!from!all!UK!Universities!each!year!including!reported!scope!1!and!2!emissions!in! tCO2e!(HESA,!2013).!Analysis!of!this!data!from!English!Universities!(Scotland,!Wales,! and!Northern!Ireland!did!not!include!2005!baselines)!can!give!an!indication!of!the! sector’s!performance!to!date!in!terms!of!their!pledged!carbon!reductions.!! ! Figure!18!summarises!the!carbon!reduction!achieved!by!English!Universities!between! 2005!and!2013!and!the!further!reductions!required!by!2020!to!achieve!the!38%!target.! By!2013!only!a!7.73%!reduction!had!been!achieved!with!a!further!33%!reduction! required!from!the!2013!baseline!by!2020.!This!would!suggest!that!the!sector!as!a!whole! is!not!on!schedule!to!meet!its!voluntary!commitments.!HESA!(2013)!data!also!shows! that!emissions!for!English!Universities!actually!increased!for!41!Institutions!over!the! same!period.! !
- 39. !!! !39! Figure!18!Q!UK!University!Carbon!Reduction!Performance.!Based!on!Estates!Management!Date! (HESA,!2013)! ! ! Figure!19!shows!that!the!most!common!range!of!required!emissions!savings!by!2020!is! between!20%!and!39%.!In!addition!a!correlation!exists!between!Average!Net!Income! and!distance!from!the!2020!targets.!Universities!who!have!met!or!exceeded!their! absolute!carbon!reduction!targets!show!a!negative!average!net!income!of!£3,502,000,! whereas!those!who!have!the!largest!reductions!to!make!show!the!highest!average!Net! Income!of!£21,030,000.!This!suggests!that!a!Universities!business!growth!may!adversely! affect!its!carbon!reduction!performance.!! ! ! Figure!19!Q!Required!percentage!reduction!in!tCO2e!by!2020!(Averages)! ! ! Figure!20!focuses!on!the!20!English!members!of!the!24!Russell!Group!Universities!in!the! UK,!the!Russell!Group!receives!approximately!two!thirds!of!all!research!and!contract! income!in!the!UK!(Russell!Group,!n.d.).!These!organisations!contribute! disproportionately!higher!emissions!for!the!sector,!approximately!half!of!the!1,884,000! tCO2e!reported!for!2013.!An!absolute!reduction!of!only!1.72%!was!achieved!between! 2005!and!2013,!with!the!Russell!Group!having!to!reduce!emissions!by!just!over!a!third! by!2020!if!their!commitments!are!to!be!met.! ! Range Number of Universities Net Income Number of sites Total number of buildings Grid Electricity per site (kWh) Total GIA(m 2 ) Total energy consumption (kWh) Target'Met 10 3,502,000/''''''''' 2'''''''' 93''''''''''' 6,472,317''''' 117,015'''''' 31,446,673''''''' 40/49% 21 2,090,667''''''''' 3'''''''' 52''''''''''' 7,545,748''''' 134,559'''''' 41,444,652''''''' 10/19% 14 2,294,667''''''''' 3'''''''' 26''''''''''' 2,948,895''''' 99,152'''''''' 19,335,860''''''' 0/9% 11 3,563,667''''''''' 4'''''''' 41''''''''''' 2,869,873''''' 80,983'''''''' 15,847,178''''''' 20/29% 26 8,587,333''''''''' 5'''''''' 147''''''''' 4,456,511''''' 216,231'''''' 70,236,479''''''' 50/59% 9 10,158,333''''''' 6'''''''' 101''''''''' 2,765,430''''' 160,370'''''' 41,187,375''''''' 30/39% 30 11,241,000''''''' 2'''''''' 40''''''''''' 3,594,335''''' 81,909'''''''' 19,766,187''''''' 60/69% 3 21,030,000''''''' 2'''''''' 161''''''''' 9,028,103''''' 259,512'''''' 89,626,948''''''' Energy consumption grid electricity (kWh) Energy consumption electricity consumed from onsite CHP(kWh) % Reduction required in scope 1 and 2 tCO2e between 2013 and 2020 12,687,751''''''' /''''''''''''''''''' 53.14% 16,753,932''''''' 241,834'''''''''''' /40.78% 8,802,571''''''''' 489,484'''''''''''' /9.93% 7,168,259''''''''' 2'''''''''''''''''''''' /1.52% 25,696,646''''''' /''''''''''''''''''' /21.55% 16,526,488''''''' 375,279'''''''''''' /52.10% 8,464,968''''''''' 494,346'''''''''''' /30.32% 17,488,038''''''' 16,394,152''''''' /64.13%
- 41. !!! !41! to!start!given!the!disproportionately!high!emissions!for!these!Universities!compared!to! the!rest!of!the!sector.! Drivers!for!Carbon!Reduction! ! Figure!21!shows!that!cost!reduction!was,!on!the!whole,!considered!the!main!driver! behind!carbon!reduction!initiatives!with!90%!of!respondents!considering!this!category! as!Important!or!Very!Important.!Cost!reduction!is!also!seen!as!a!key!motivation!for!EPC’s! by!Bertoldi!et#al!(2013).!Second!were!Reputation!and!National!and!International! Legislation!with!75%!or!respondents!scoring!these!drivers!highly.!All!interview! participants!also!identified!cost!reduction!as!the!biggest!driver.!A!Head!of!Sustainability! for!a!Russell!Group!University!cited!an!energy!bill!of!£16m!as!significant!despite!being! just!over!1%!of!overall!expenditure!for!that!organization!(HESA,!2013).!An!Energy! Manager!from!a!post!1992!University!pointed!out!that!energy!price!rises!were!a!concern! noting!that!electricity!prices!had!risen!5%!for!that!year!and!he!would!expect!an!upward! trend!to!continue.!An!ESCO!supplier!interviewed,!also!confirmed!that!the!main!driver!for! prospective!clients!was!cost!reduction!followed!by!carbon!reduction,!improved! environmental!reputation!and!then!the!reassurance!of!the!included!savings!guarantee.! ! Figure!21!Q!Drivers!behind!University!carbon!reduction!initiatives! ! ! Each!of!the!interviewees!also!saw!reputation!as!a!key!driver,!the!Russell!Group! participant!stated!that!reputation!for!good!carbon!management!was!important!given!the! high!profile!nature!of!the!organization.!Two!individuals!rated!HEFCE!policies!as!the!next! most!important!driver!behind!cost.!Universities!could!potentially!suffer!from!a!40%! 0" 1" 2" 3" 4" 5" Reputa.on" Cost"reduc.on" Na.onal"and"interna.onal"legisla.on" Mi.ga.on"of"climate"change" HEFCE,"HEFCW"or"SFC"carbon"reduc.on"policies" Student"reten.on" What%are%the%key%drivers%behind%the%University's%energy%/%carbon%reduc7on%ini7a7ves?%(Please%rate%in%order% of%importance%from%1%to%5,%1%=%Not%Important,%5%=%Very%Important)% %
- 42. !!! ! 42! reduction!in!Capital!Investment!Framework1!(CIF)!funding!from!HEFCE!should!emission! targets!not!be!met.!Robinson!et!al!(2014)!suggest!that!this!was!the!consequence!for!four! Universities!(Leeds,!Sheffield,!UCL!and!LSE)!for!failing!to!reduce!normalized!emissions! as!part!of!CIF!2!requirements!(HEFCE.c,!n.d.).!One!Energy!Manager!interviewed,!stressed! that!the!threat!of!reduced!CIF!funding!from!HEFCE!was!a!key!driver!for!energy!efficiency! within!his!Estates!department.! ! None!of!the!interview!participants!raised!National!and!International!Legislation!as!a! main!driver!although!this!scored!highly!in!the!online!survey.!Mitigation!of!Climate! Change!and!Student!Retention!scored!lowest!in!the!survey.!However!a!University!Vice! Chancellor!raised!both!criteria!as!key!drivers!during!an!interview.!He!firstly!considered! carbon!reduction!as!the!“right!thing!to!do”!and!secondly!from!a!marketing!perspective! because!he!believes!students’!University!selection!is!increasingly!influenced!by! sustainability.!Finally!he!stressed!the!economic!benefits!of!energy!efficiency.!Mitigation! of!Climate!Change!is!perhaps!more!of!a!driver!at!Board!level!with!one!Sustainability! Manager!currently!undertaking!an!EPC,!scoring!this!as!Very!Important.!He!also!noted!in! his!interview!that!carbon!management!had!the!full!backing!of!the!University!Board!with! a!34%!reduction!in!scope!1!and!2!emissions!achieved!from!a!2005!baseline!to!date.!One! Energy!Manager!for!a!PostJ1992!University!scored!Mitigation!of!Climate!Change!as!an! “Important”!driver!including!the!additional!comment:!“because!our!Deputy!Vice! Chancellor!thinks!it’s!the!right!thing!to!do”!in!the!online!survey.! ! ! ! ! ! ! ! ! !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 1!The Capital Investment Framework was introduced by the HEFCE in 2008 to foster academic excellence in universities through good quality infrastructure, equipment and information communication technology (ICT) and has so far allocated nearly £600 Million in funding (HEFCE, n.d.-c) !
- 43. !!! !43! Barriers!to!carbon!reduction! ! Figure!22!Q!Barriers!to!delivering!energy!conservation!measures! ! ! As!Figure!22!shows!insufficient!resources!to!identify!and!deliver!energy!projects!was!the! highest!scoring!criteria!when!assessing!barriers!to!delivering!energy!conservation! measures.!A!University!Sustainability!Manager!currently!undertaking!an!EPC!cited!the! time!and!resource!intensive!nature!of!delivering!energy!efficiency!projects!as!a!key! factor!for!using!an!EPC.!! ! Lack!of!capital!funding!available!to!estates!departments!was!the!second!highest!scored! barrier.!An!Energy!Manager!pointed!out!in!his!interview!that!he!only!had!an!annual! budget!of!£50,000!available!each!year!to!spend!on!energy!efficiency!for!compared!to!an! energy!spend!well!into!the!£millions.!However!the!findings!from!interviews!suggest!that! when!an!organization!decides!to!commit!to!largeJscale!energy!efficiency!improvements,! funding!is!more!often!than!not!provided!from!internal!budgets!rather!than!from!3rd! party!finance.!A!Program!Manager!for!a!Public!Sector!EPC!Scheme!did!not!see!a!lack!of! funding!as!a!general!problem,!confirming!that!of!the!40!clients!on!the!EPC!program!only! 10!had!borrowed!externally!to!fund!the!projects.!This!view!was!supported!by!a!HE! Sector!Organisation!who!believed!that!English!Universities!in!general!had!funding! available!to!finance!projects!or!could!borrow!externally!at!a!favourable!rate.!In! conversation!with!two!NHS!Trusts!and!one!University!undertaking!EPC’s!all!elected!to! use!their!own!capital!to!finance!the!projects!which!was!considered!the!cheaper!option! than!incurring!interest!from!3rd!party!finance.!The!implication!is!that!funding!for!energy! efficiency!is!a!question!of!priority!within!an!organization,!so!that!when!once!a!decision!is! made!to!go!ahead!with!largeJscale!improvements!internal!finance!is!preferred.! ! 2.6$ 2.7$ 2.8$ 2.9$ 3$ 3.1$ 3.2$ 3.3$ 3.4$ Lack$of$capital$funding$ Insufficient$internal$resources$to$iden>fy$/$deliver$projects$ Lack$of$senior$level$commitment$ Complexity$of$projects$ Length$of$procurement$process$ Priori>es$lie$with$core$business$ Evidencing$energy$/$cost$savings$to$the$decision$makers$ What%are%the%main%barriers%to%delivering%energy%conserva4on%measures%at%the%University?%(Please%rate%in%order%of%importance% from%1%to%5,%1%=%Not%Important,%5%=%Very%Important)% %
- 44. !!! ! 44! An!interview!with!a!Head!the!Sustainability!for!a!Russell!Group!University!highlighted! barriers!that!were!not!given!as!options!in!the!online!survey!but!are!nonetheless! significant!particularly!for!Russell!Group!members.!As!already!discussed,!a!key!factor!is! the!researchJintensive!nature!of!this!University’s!activities.!The!challenge!being!how!to! reduce!energy!use!from!high!income!generating!income!practices!often!involving!plugJin! electrical!loads.!Another!issue!raised!was!the!nature!of!the!University’s!estate.!A!number! of!energy!intensive!science!buildings!have!been!built!often!from!the!proceeds!of!large! external!donations.!Understandably!a!University!may!be!reluctant!to!dictate!a!more! energy!efficient!design!for!a!building!if!this!is!not!a!key!requirement!for!its!funder.!In! addition!energy!performance!has!deteriorated!for!some!buildings,!such!as!those!built!in! the!1960’s,!because!their!use!has!changed!over!time!and!is!not!now!compatible!with! their!original!design.! Assessment!Criteria!for!Energy!Efficiency!Projects! ! Figure!23!Q!Key!criteria!used!to!assess!energy!conservation!projects! ! ! Project!payback!was!considered!on!average!to!be!the!most!important!assessment! criteria!for!energy!conservation!projects.!In!terms!of!specific!limits!an!Energy!Manager! confirmed!that!for!his!organisation!projects!must!pay!back!in!less!than!10!years!and! deliver!savings!at!a!cost!of!no!more!than!£1,000!per!tonne!of!carbon!saved.!A! Sustainability!Manager!interviewed,!confirmed!that!the!University!sector!was!in!better! position!to!take!a!longer!view!over!projects!given!the!relatively!secure!future!of!its! estates!and!financial!position.!Interestingly!Return!on!Investment!was!seen!as!the!next! most!important!factor.!Whereas!project!payback!accounts!for!the!length!of!time!the! 0! 0.5! 1! 1.5! 2! 2.5! 3! 3.5! 4! 4.5! 5! Return!on!investment!(incl!full!lifecycle!savings)!! Project!payback! Level!of!carbon!savings! Level!of!technical!complexity! Level!of!internal!resource!required! Project!duration! Post!project!verixication!of!savings! Length!of!procurement!process! Soft!issues!(i.e!student!experience)! What!are!the!key!criteria!used!to!assess!business!cases!for!energy!conservation!projects?! (Please!rate!in!order!of!importance!from!1!to!5,!1!=!Not!Important,!5!=!Very!Important)! !
- 45. !!! !45! resulting!savings!from!an!energy!efficiency!project!can!recoup!the!original!investment,! Return!on!Investment!would!consider!the!lifetime!savings!achieved!from!a!project! included!those!achieved!after!the!original!investment!had!been!paid!off.!This!is! important!for!EPC’s!as!typically!paybacks!are!greater!than!8!years!(see!Figure!8).!An! ESCO!supplier!emphasized!the!uniqueness!of!a!shared!savings!model,!in!that!payback!is! not!an!issue!as!there!is!not!an!up!front!capital!investment!for!the!client!to!recoup.! Investment!required!to!meet!carbon!reduction!targets! ! Nearly!40%!of!organisations!surveyed!estimated!that!they!would!require!more!than!£10! million!of!investment!to!meet!their!pledge!carbon!reduction!targets,!a!further!33%! would!require!more!than!£5!million.!A!further!area!for!investigation!would!be!to! understand!more!specifically!the!level!of!finance!required!above!the!£10!million! threshold,!as!this!could!conceivably!be!much!higher.! ! Figure!24!Q!Level!of!investment!required!to!meet!carbon!reduction!targets! ! ! However!from!this!evidence!a!very!rough!estimate!can!be!made!of!the!overall!level!of! financing!required!for!the!UK!University!sector!as!a!whole.!The!respondents!of!the! online!survey!are!broadly!representative!of!the!University!Sector!so!if!the!average!spend! required!in!the!survey!is!£6!million!then!this!would!equate!to!£774!million!for!English! Universities!(across!129!institutions)!and!£948!million!across!all!158!UK!Universities.!A! further!estimate!can!be!made!by!taking!621,610!tCO2e!as!the!level!of!emissions!required! between!2013!and!2020!(see!Figure!18)!and!then!applying!the!average!cost!per!tCO2! saved!of!£1,100!highlighted!in!the!EPC!Case!Study!analysis!(see!Figure!8),!to!give!£683! million.!Despite!being!very!rough!estimates!of!required!spending!it!is!clear!that!the! levels!of!finance!needed!are!significantly!challenging!for!Universities!and!a!potential! opportunity!for!the!ESCO!market!to!expand.! 0%! 5%! 10%! 15%! 20%! 25%! 30%! 35%! 40%! 45%! More!than!£10,000,000! More!than!£5,000,000! More!than!£2,500,000! More!than!£1,000,000! More!than!£500,000! Other!(please!specify)! What!level!of!investment!do!you!estimate!is!required!to!meet!the! University's!carbon!reduction!targets?! !