Day 5: ESCOs Rules and Roles


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Energy Audit in Building A Regional Training Workshop
1 - 5 June, 2010

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Day 5: ESCOs Rules and Roles

  1. 1. PLAN SOLAIRE TUNISIENESCOs rules and roles Néji
  2. 2. WHAT IS AN ENERGY SERVICES COMPANY (ESCO)?An ESCO is a single firm that manages andcoordinates all phases of an energy project andprovides many types of services services.
  3. 3. WHAT IS AN ENERGY SERVICES COMPANY (ESCO)?A‐ Common services:• Energy audit; gy ;• Construction management services, including preparation of performancespecifications,specifications project design and project commissioning;• Project financing;• Project monitoring and guarantee of energy savings; d f•Awarness and capacity buildings;•Equipment maintenance and operations;•Others (administrative services, specific consulting,…).
  4. 4. WHAT IS AN ENERGY SERVICES COMPANY (ESCO)?B‐ Types of EB T f Energy S i Services C Compagnies: iThe main types are:•Large companies with existing energy equipment businesses: Large • They have all the technical and financial expertise within their own staff; • They generally focus on large projects; They generally focus on large projects; • They provide all project services from energy audit through equipment  maintenance to monitoring; maintenance to monitoring; •Some of them provide administrative services such as personnel to manage  and operate the facility; and operate the facility; •Many are directly involved in the energy equipment business, especially, heating,  cooling, ventilating and air conditioning equipment and controls cooling ventilating and air conditioning equipment and controls
  5. 5. WHAT IS AN ENERGY SERVICES COMPANY (ESCO)?B‐ Types of Energy Services Compagnies:•Companies that were previously energy consultants: • They have expertise and knowledge with many types of technologies; • Larger ones ha e all the technical e perts within their compan while have experts ithin company hile smaller ones will team up with others to provide technical services such as energy audits, project design, project management and monitoring; •Services such as equipment maintenance are generally contracted to other compagnies.
  6. 6. WHAT IS AN ENERGY SERVICES COMPANY (ESCO)?B‐ Types of Energy Services Compagnies:•Companies specialized in one technology: CompaniesFor specialized technolgy like lighting, cogeneration, cooling,heating, air conditionning these kind of ESCOs are involved intheth manufacture, sale of equipment and can also provide f t l f i t d l idtechnical analysis, equipment specifications and projectmanagement.
  7. 7. WHAT IS AN ENERGY SERVICES COMPANY (ESCO)?C‐ Comparison with other types of contractors:ESCOs differ from architectural and engineering (A&E) firms in several g g ( )ways. While both supply engineering services, ESCOs also can provide orhelp arrange financing, maintain equipment and guarantee projectperformance or savings savings.Some ESCOs enter into performance contracts with guarantee that thecost of the project is recovered from energy savings. On the other hand,A&E firms provide only technical analysis, engineering design and,sometimes, construction management services.
  8. 8. WHAT TYPICAL SERVICES DO ESCOs PROVIDE?Historically ESCOs provided a complete package of services.A recent Energy Commission survey indicated that most ESCOs will gy ybid for specific services, tailoring their service to meet customerneeds. Typical ESCO services include ESCO services include
  9. 9. WHAT TYPICAL SERVICES DO ESCOs PROVIDE?A‐ Energy audit:•An energy audit analyzes the operation of your major energy‐using systems and d t i t d determines whether i i h th improvements can i t increaseefficiency;•A comprehensive audit, however, analyzes all cost‐effectiveenergy projects for lighting, HVAC equipment, cooling, domestichot water systems controls and energy generation systems systems,(generally prepared when performance contracting is involved)•Comprehensive audits are referred to by the ESCO industry as an“investment grade audit.”
  10. 10. WHAT TYPICAL SERVICES DO ESCOs PROVIDE?B‐B Construction management services services:By serving as a construction manager and overseeing the installation ofthe project, an ESCO can:•Develop the overall project approach;•Manage the selection of contractors;•Manage contractor work;•Provide on‐site construction management and inspection services;•Obtain all regulatory permits; g yp ;•Direct equipment testing, commissioning and monitoring to verify energy savings;•Ensure the awarness and the training of the client’s staff. Ensure the awarness and the training of the client s staff. An ESCO may perform some or all of these tasks
  11. 11. WHAT TYPICAL SERVICES DO ESCOs PROVIDE?D‐ Project guarantees:Having the ESCO guarantee project performance may help get theproject approved through management. Project guarantees, however,are complex and tend to increase project cost.It may take a long time to negotiate a mutually acceptable agreement.One of the complexities is reaching agreement on an acceptable energyuse baseline and the basis for calculating future savings.ToT verify th t th project meets th performance guarantees, ESCO if that the j t t the f t ESCOsprovide project monitoring and verification. Monitoring can be done byinstalling meters on specific equipment to measure equipment g p q p q pperformance and operation, or it can involve tracking utility bills in theaffected buildings.
  12. 12. WHAT TYPICAL SERVICES DO ESCOs PROVIDE?D‐ Project guarantees:•Since it requires that data be collected and evaluated for the Since it requires that data be collected and evaluated for the period of the performance agreement, project metering can be expensive. g y gy•Most ESCOs generally do not install meters but will use energy accounting software to track utility bills.
  13. 13. WHAT TYPICAL SERVICES DO ESCOs PROVIDE?D‐ Project guarantees:•ESCOs charge until five percent of the project cost for the guarantee; g p p j g ;•Some believe that guarantees are “not worth much” since there aremany ways to account for energy savings and any method is subject to savings,“error and interference";•In many projects, only some equipment is monitored and the data isextrapolated for the equipment not monitored. But, in some others, allthe equipment are monitored and the energy saving is directlycalculated.calculated
  14. 14. WHAT TYPICAL SERVICES DO ESCOs PROVIDE?D‐ Project guarantees:The calculation of energy savings is subject to analysis andassumptions made by the ESCO; often it is difficult to disputetheir findings. As a result, energy savings cannot be determinedwith absolute certainty. y
  15. 15. WHAT TYPICAL SERVICES DO ESCOs PROVIDE?E‐ Equipment maintenance and servicing:•In order to guarantee performance or savings, an ESCO often willrequire a maintenance contract and some control over theequipments. This helps the ESCO to ensure that the installedequipment will achieve th guaranteed savings stipulated i th i t ill hi the t d i ti l t d in thecontract;•Normally, the annual cost of a maintenance contract is less than Normally,five percent of the project cost and depends on the level of servicedesired;•Maintenance services can include tracking utility bills, reviewingoperation strategies, reporting on equipment operating problems,and repairing and replacing equipment equipment.
  16. 16. WHAT TYPICAL SERVICES DO ESCOs PROVIDE?F‐ Other services:Some ESCOs provide a variety of other services, such as:•Administrative and technical support: qualified staff can be provided tooperate and manage the project; p g p j•Training: with proper training, the client’s in‐house staff can operate andmaintain the equipment allowing the client to forego (cad:renoncer à) equipment,the need for ESCO maintenance;•Specialized technical help: ESCO can monitor indoor air quality, evaluateelectricity and gas purshase or accomplish other specialized tasks.
  17. 17. WHAT  ARE TYPICAL CONTRACTS?There are a number of ways to contract with ESCOs depending onthe degree of risk that the organization assumes. If the ESCOassumes all the risks and guarantees project performance, thecost for their services will be higher.The main types of contracts are as follows:
  18. 18. WHAT  ARE TYPICAL CONTRACTS?A‐ Shared savings:In this arrangement, cost savings are measured according to amutually agreeable method and are shared between the client andthe ESCO on either a fixed or variable basis.Examples of typical shared arrangements include: • Variable fee: The fee depends on a fixed percentage of the monthly savings. As the monthly savings fluctuates, so does the fee. • Scaled fee : The fee declines over time as the ESCO recovers its investment investment.
  19. 19. WHAT  ARE TYPICAL CONTRACTS?A‐ Shared savings: • Specified fee and split of savings in excess of the fee: The fee is fixed and any excess savings is split between the ESCO and the client; • Savings go to the ESCO until a specified amount is reached: The ESCO initially gets all the cost savings from the project until a specified amount. After that point, the ESCO splits the savings with The client.
  20. 20. WHAT  ARE TYPICAL CONTRACTS?A‐ Shared savings:Regarding to these arrangements, some areas are to consider:•Shared savings contracts allow the client to put the financing offbalance sheet since th ESCO provides th fib l h t i the id the financing. H d ’t i He don’tneed to use its borrowing capacity.•The ESCO carries financing, credit and performance risks. Sincethe ESCO assumes all these risk, the cost of money or the interestcharged is higher than in other options.
  21. 21. WHAT  ARE TYPICAL CONTRACTS?A‐ Shared savings:•Public agencies cannot share savings, with private companies iftax‐exempt financing is used. In shared savings contracts, ESCOfinancing is based on commercial interest rates which is higherthan tax‐exempt fith t t financing. i•If there are no cost savings, the ESCO does not get paid. If savings Ifare greater than expected, the client will pay more than expectedfor the use of the equipment. The ESCO and financier hope thatthe future price of energy will increase since it will increase theirshare of the savings.
  22. 22. WHAT  ARE TYPICAL CONTRACTS?B‐ Guaranteed savings contracts:Contracts can be set up to guarantee that the energy savings from the project will meet or exceed a certain minimum amount (either th j t ill t d t i i i t ( iththe full amount or a percentage of the savings specified in the  gy )energy audit).Some areas have to be considered: •The savings are guaranteed to make client’s equipment paymentsor debt ( cad créance) service, provided that energy prices do notfall below a specified floor price The savings level is guaranteed to or exceed the specified minimum, usually an amount greaterthan client’s equipment payment.
  23. 23. WHAT  ARE TYPICAL CONTRACTS?B‐ Guaranteed savings contracts:•Project financing is fully provided by the client through a loan,capital lease or operating lease. The financier does not rely on thesavings guarantee since the client is responsible for the financing.TheTh guarantee’s presence or absence h littl effect on th cost of t ’ b has little ff t the t ffunds.•This approach allows the use of tax exempt f f financing and allowsthe client to retain more of the savings than in shared savingscontracts.contracts Tax‐exempt financing offers the best interest rates rates.
  24. 24. WHAT  ARE TYPICAL CONTRACTS?C‐ No guaranteed savings contracts:In this type of contract, the ESCO only provides the energy audit,design, construction management and commissioning. There is noguarantee of th energy savings or performance. t f the i fThe client assumes the responsibility and financial risk. Inexchange, he receives all the saving benefits associated with theprojects.
  25. 25. WHAT  ARE TYPICAL CONTRACTS?D‐ Other considerations:Once the client is experienced in getting energy efficiency projectsinstalled, he may realize that these projects often are low risk. Hemay forego the need for a guarantee and shoulder more of the risk y g gin exchange for increased financial benefits. For example, the client may:
  26. 26. WHAT  ARE TYPICAL CONTRACTS?D‐ Other considerations:•Decide to purchase energy efficient equipment and rely on themanufacturer’s warranties, foregoing an ESCO guarantee;•Perform the own post‐installation maintenance and accept therisk of accountability within it own work f ik f t bilit ithi its k force;•Finance the installation and hire a construction manager or ESCOto be accountable for poor workmanship during installation;•Forego the guaranteed savings if he is confident that theprojections in the energy audit are valid;•Perform his own post‐installation monitoring or energy accountingto verify project savings.
  27. 27. WHAT  ARE THE BARRIERS TO THE ESCO DEVELOPMENT?A‐ General Barriers: A‐1: related to financing Energy Performance Contract (EPC)  contracts:•Financing of EPC is a major problem especially in developping countrieswhere th ESCO i d t i still young and unknown and th b ki h the industry is till d k d the bankingsector is too conservative;•Since numerous b k l k information about energy efficiency banks lack f b ffpotentials and especially experience in lending to ESCOs they considerEPC often as a risky business;•Banks are especially reluctant to lend money to small and new ESCOs,who cannot bring guarantees. gg
  28. 28. WHAT  ARE THE BARRIERS TO THE ESCO DEVELOPMENT?A‐ General Barriers: A‐2: Strucural and political barriers:•Low energy prices do not provide incentives to reduce energy useby improving energy efficiency;•In some countries, there is a lack of government support forenergy performance contracting;•Safety and reliability concerns can hinder the introduction of moreenergy efficient new technologies;•EPC is not an easy business and requires deep know‐how ofenergy, financing, buildings, and industry processes to become awin win‐win project
  29. 29. WHAT  ARE THE BARRIERS TO THE ESCO DEVELOPMENT?A‐ General Barriers: A‐2: Strucural and political barriers:•Decision makers are often unaware of the significantopportunities for energy and cost savings since their priorities areaimed at areas more popular with voters such as education health education,or unemployement.•In some countries, public authorities are afraid of outsourcingthrough EPC because they fear a loss of job and control systems.•In many countries, specific provision on ESCOs and EPC are stillmissing in the regulatory framework and certain traditional legalprovisions can create problems for ESCOs (especially concerningpublic procurement)
  30. 30. WHAT  ARE THE BARRIERS TO THE ESCO DEVELOPMENT?B‐ Specific Barriers: B‐1: In the public sector:•In many countries, specific provision on ESCOs and EPC are stillmissing in the regulatory framework and certain traditional legal g g y gprovisions can create problems for ESCOs (especially concerningpublic procurement);• The energy savings are not in the priority of the public fcompanies;•the public procurement rules have not yet included EPC as an itemto be sourced through a tender process.
  31. 31. WHAT  ARE THE BARRIERS TO THE ESCO DEVELOPMENT?B‐ Specific Barriers: B‐2: In the industrial sector:•Numerous companies do not allow ESCOs to check the coreindustrial processes because of fears about trade secrets p• In many companies, the qualified and available staff isinsufficient, the energy management infrastructure is limited andthe link between the technical staff and the strategic management fflevel is missing.•Many companies prefer to modernize their outdatedmanufacturing processes rather than invest their small revenues inenergy efficiency. gy y
  32. 32. WHAT  ARE THE BARRIERS TO THE ESCO DEVELOPMENT?B‐ Specific Barriers: B‐3: In the commercial sector:Barriers or EPC in the commercial sector resemble those in theresidential sector :•Building owners often lack awareness about the possibility of EPC or knowledge on how to implement it.or knowledge on how to implement it.•Some of them are reluctant  to engage in multi‐year contracts.•ESCOs and banks often consider the tertiary sector to be anunreliable client and the potential energy savings to be too small if p gy gthe annual energy costs are below a certain amount.
  33. 33. WHAT  ARE THE BARRIERS TO THE ESCO DEVELOPMENT?B‐ Specific Barriers: B‐4: In the residential sector:ESCOs are often not interested in this sector, for various reasons:•Energy and cost saving possibilities of a single project are usually small compared to the transaction costs.•The absence of the guaranteed savings model in this sector.•The EPC mechanism is not understood by many building owners owners.•Owners have a limited budget and would rather spend money on improvements of the comforti t f th f t
  34. 34. MAIN RECOMMODATIONS  FOR  A SUCCESSFUL ESCO INDUSTRY CO O O S O S CC SS SCO SA‐ Legislative and financial conditions:A Legislative and financial conditions:•The success of ESCOs is mainly due to direct or indirectggovernmental support as well as favourable legislation. pp g•Sufficient technical and financial capacity of ESCOs as well asopenness of the legal and financing system for EPC are important.•Clear information on the tender and award procedure as well asbudgetary provisions are crucial for the success of EPC mainly inthe public sector sector.•Energy price levels and enforcement of contracts as well as long‐term predictability of the legislation are major factors for EPC p y g jinvestment.
  35. 35. MAIN RECOMMODATIONS  FOR  A SUCCESSFUL ESCO INDUSTRY CO O O S O S CC SS SCO SB‐ Creation of energy agencies:B Creation of energy agencies:•Energy agencies can disseminate information about EPC andpromote th ESCO i d t t the industry.•They can play an important role as mediators between ESCOs andtheir customers.•Energy agencies can support officials in the public sector whosetime and knowledge are often limited.
  36. 36. MAIN RECOMMODATIONS  FOR  A SUCCESSFUL ESCO INDUSTRY CO O O S O S CC SS SCO SC‐ Development of accreditation systems:C Development of accreditation systems:•Since mistrust is a major barrier, information about ESCOs needsto bet b complemented b measures t confirm and i l t d by to fi d increase th i theirreliability for the potential clients.•An accreditation system is an important measure to increase trustand reliability.•However, an accreditation system may also have disadvantagessince the process of receiving accreditation is usually so expensivethatth t small ESCO might not b able t afford it ll ESCOs i ht t be bl to ff d it.
  37. 37. MAIN RECOMMODATIONS  FOR  A SUCCESSFUL ESCO INDUSTRY CO O O S O S CC SS SCO SD‐ International cooperation:D International cooperation:•International contacts through conferences or networks can helpto increase th i tt i the interest i EPC raise th competence of new ESCO t in EPC, i the t f ESCOsand their (potential or actual) clients as well as foster valuableexchange of experience experience.•Contacts and networks are especially important since the EPCconcept is often disseminated through these channels channels.•Experience on ESCO, technical assistance and tools can be sharedthrough networksth h t k
  38. 38. BEST PRACTICES OF ESCOs S C C S O SCOA‐ India: A‐1: General characteristics•The energy efficiency program started in India a long time ago in The1964, a more interest in energy efficiency and conservationmatters after the enactment of the Energy Conservation Act 2001.•Market potential for energy saving is estimated to be around 53billion KWh and corresponding peak saving of 8935 MW.•The energy audit market in the country is matured with twenty‐seven firms having more than a decade of experience and somehaving more than two decades of operational experience experience.•ESCOs are a new concept in India which started to appear in 1994‐1995
  39. 39. BEST PRACTICES OF ESCOs S C C S O SCOA‐ India: A‐2: Description of the ESCO industry:• 20 ESCOs are reported to be operating in the country and onlyaround 12 may be seriously doing ESCO business.•Except a few, the ESCOs in the country are small or medium scaleprivate players with consultant strength of fi or l i t l ith lt t t th f five less.• ESCOs can be classified in two types: equipment related and service‐related ESCOs. •The equipment linked ESCOs generally manufacture/provide oneset of products, like lighting, whereas service providers cater todifferent sectors sectors.•The ESCOs have undertaken projects with capital costs rangingfrom 3000 USD to 2 million USD.
  40. 40. BEST PRACTICES OF ESCOs S C C S O SCOA‐A India: A‐2: Description of the ESCO industry:• Th ESCO projects i I di are generally carried out under th The j t in India ll i d t d theguaranteed savings scheme but in a few cases the shared savingsscheme is also used used.•The Indian Renewable Energy Development Agency (IREDA), is aprominent organization in India in Energy Efficiency financing.prominent organization in India in Energy Efficiency financing•The World Bank has extended a Line of Credit to IREDA fordeveloping and fid l i d financing energy efficiency and conservation i ffi i d tiprojects that includes project implemented in ESCO model.
  41. 41. BEST PRACTICES OF ESCOs S C C S O SCOA‐A India: A‐2: Description of the ESCO industry:• Th commercial b k i th country are generally apprehensive The i l banks in the t ll h iof financing EE projects. However, recently, five prominent banks inIndia have launched EE schemes for Small and Medium Entreprises(SMEs).•The schemes are addressed towards their existing SME clients andfor small projects up to USD 22,000.
  42. 42. BEST PRACTICES OF ESCOs S C C S O SCOA‐ India: A‐3: Impact/evaluation enabling factors:• General energy market context: In order to sustain the present gy peconomic growth, it is desired to have a capacity increase of 100,000MW by the year 2012. It is difficult to meet the demand by additioncapacity alone. Energy efficiency and conservation is considered as oneof the cost effective solutions to bridge the gap.•Legislation: there have been a few policy initiatives from thegovernment in the energy sector, such as the enactment of the EnergyConservation Act 2001 which also aims to strengthen the deliverymechanism of energy efficiency services. Furthermore, the National gy y ,electricity policy (2005) suggests that energy conservation will beadopted in all government buildings for which the energy savingpotential is estimated to be 30%.
  43. 43. BEST PRACTICES OF ESCOs S C C S O SCOA‐A India: A‐3: Impact/evaluation enabling factors:•D Demonstration projects: energy audits were conducted, with th t ti j t dit d t d ith thesupport of government and international funding agencies, ingovernment buildings The suggestions made in the energy audit buildings.were implemented through performance contract mode by ESCOs.•Financial support: The Indian commercial banks have introducedenergy efficiency schemes in their portfolio targeting SMEs. Someof them have some incentive schemes in place as well, like partially p , p ycovering the cost of energy audit and detailed project preparation.
  44. 44. BEST PRACTICES OF ESCOs S C C S O SCOA‐A India: A‐3: Impact/evaluation enabling factors:•I t International programs: Th ti l There h have b been some ongoing iinternational aided projects to strengthen the ESCOs in the country(the World Bank , UNEP USAID ) UNEP, USAID,…).
  45. 45. BEST PRACTICES OF ESCOs S C C S O SCOB‐B USA: A‐1: General characteristics•The U it d St t i d Th United States is described as th oldest and most mature ib d the ld t d t tESCO market in the world. The first energy service companies(ESCOs) in the USA emerged in the 1970s 1970s.•In the 1980s, especially from 1988 to 1994, generated electricityshortages led to the introduction of bidding programs: the utilitiesoffered monetary incentives to clients who reduced their energyuse and peak load. They help their clients by creating ESCOs as p y p y gsubsidaries.
  46. 46. BEST PRACTICES OF ESCOs S C C S O SCOB‐B USA: B‐2: Description of the ESCO industry: M th 60 ESCO ff f t ti•More than 60 ESCOs offer performance contracting.•They are active in the fields of lighting efficiency and comfortconditionning. Ther are often interested in comprehensive servicessuch as project management, energy audits and•The public sector is the major target sector of the US ESCO p j gindustry.
  47. 47. BEST PRACTICES OF ESCOs S C C S O SCOB‐B USA: B‐2: Description of the ESCO industry:•The i d t ’ revenues h Th industry’s have grown f from 450 million US$ per year illiin 1995 to approximately 2 billion US$ in 2000 with a yearly growthrate of almost 24% 24%.•US ESCOs are concentrated in certain geographical areas: ESCOs in 4 states account for 44% of all investment costs.•For more than 20 years, the most important ESCO association inUS (NAESCO) has been the major representative organisation,providing t h i l and i f idi technical d informational support t it members as ti l t to its bwell as an accreditation programme.
  48. 48. BEST PRACTICES OF ESCOs S C C S O SCOB‐B USA: B‐2: Description of the ESCO industry:•The accreditation committee looks at criteria including thefollowing: the precise nature of the applicant‘s business; the range g p pp ; gof measures and services offered to customers; the availability of aperformance‐based project approach; ethical business practicecommitment; project engineering and design, financing, projectmanagement, operations, and maintenance capabilities; and thecapability of verifying and monitoring energy cost savings. bilit f if i d it i t i
  49. 49. BEST PRACTICES OF ESCOs S C C S O SCOB‐B USA: B‐3: Impact/evaluation enabling factors:• A combination of enabling f d l l i l ti and governmental bi ti f bli federal legislation d t lprogrammes including public benefit charges, customer educationand information facilitated the development of the ESCO‐market in ESCO marketthe USA;•The public sector has played a very important role and is still themajor ESCO target area in the US;•Due to supportive legislation, public institutions can enter intomulti‐year fi lti financial commitments and make th i procurement i l it t d k their tdecisions more flexible favouring "best value" proposals ratherthan lowest‐cost bids ; lowest cost
  50. 50. BEST PRACTICES OF ESCOs S C C S O SCOB‐B USA: B‐3: Impact/evaluation enabling factors:• Th f d l E The federal Energy P li A t of 1992 prescribed th t f d l Policy Act f ib d that federalagencies take certain steps to manage their energy use allowingthem to regulate the use of Energy Savings Performance Contracts(ESPC).•Executive Orders (EO) obliged Federal Agencies to reduce energyconsumption of buildings cost‐effectively by 30% until 2005 and35% by 2010 as compared to their consumption in 1985. They are y p p yassisted by the Federal Energy Management Program (FEMP).
  51. 51. BEST PRACTICES OF ESCOs S C C S O SCOC‐ Germany: C‐1: General characteristics•Germany is often characterized together with Austria as the most Germanydevelopped ESCO market in the EU;•At the beginning of the 90s, the first ESCOs emerged in Germany,but theb t th market was still rather i i ifi t and only th h t k t till th insignificant d l the heatsupply contracting market was growing;•In 1995, the municipality of Berlin decide to bundle about 100 , p ymunicipal buildings together and contract several ESCOs toimprove their energy efficiency: It was the first major project ;•The liberalization and restructuring of the electricity industrystimulated the ESCO market development and many utilitycompanies turned into energy service companies.
  52. 52. BEST PRACTICES OF ESCOs S C C S O SCOC‐C Germany: C‐2: Description of the ESCO industry:•About 500 ESCOs existed in Germany However 80% of this is Energy Germany. However,Supply Contracting and only 15% Energy Performance Contracting (5%:other forms of contracting such as operation management contracting);•The sectors targeted by ESCOs in Germany have been as follows:(municipal sector: 30 %; Industrial sector: 35 %; Commercial sector: 25%;Residential sector: 10%);•The annual turnover from energy services in Germany in 2005 wasapproximately 2 billion Euros;•In 2004, energy contracting in the industrial sector had an annualturnover of 192 million euros accounting for one fifth of the wholemarket. k
  53. 53. BEST PRACTICES OF ESCOs S C C S O SCOC‐ Germany: C‐2: Description of the ESCO industry:•Because of the high investment volume and the favourable banking g gsystem, third party financing is widely used in Germany;•Most German EPC contracts use the model of shared savings which alsoincludes a savings guarantee:the ESCO and its client agree beforehand ona share of energy cost savings for each (for example 70% for ESCO andthe rest for client) as well as a share if saving projections are exceeded(often 50% for both);•The major cross‐regional ESCOs in Germany have formed an ESCOAssociation (PECU) with only about 16 member companies;• PECU provides information and is engaged in political lobbying in orderto improve the conditions for EPC in Germany. Furthermore, there isanother ESCO association comprising 230 ESCOs in Germany whichcoverd about 23000 projects i 2005 d b t j t in 2005.
  54. 54. BEST PRACTICES OF ESCOs S C C S O SCOC‐C Germany C‐3: Impact/evaluation enabling factors:• Th relative success of th ESCO i d t i G The l ti f the industry in Germany i d t is due toseveral factors, but owes primarily to political decisions;•Because of the increased competition the liberalization of Because competition,electricity provided opportunity as well as necessity to utilitycompanies to expand their business field beyond the traditionalelectricity sales to energy services;•The increase of energy taxes (approximately 35% of the totalindustrial l t i iti d t i l electricity price) combined with th rising oil price, i an i ) bi d ith the i i il i isimportant incentive for companies to care about their energyefficiency and thus to engage in energy performance contracting contracting.
  55. 55. BEST PRACTICES OF ESCOs S C C S O SCOC‐ Germany C‐3: Impact/evaluation enabling factors:•Some ESCOs even consider the energy taxes, which were introduced in gyGermany in 1999 and gradually increased, as the most important politicalsupport measure;•Creating a demand for energy performance contracting from the public Creatingsector through the Energy Saving Partnership in Berlin was a very positiveand visible starting signal for the ESCO industry;•The Berlin bestpractice example was further disseminated mainly to the Thecommercial and municipal sectors;•The energy agencies at national, regional and local levels carry‐outenergy efficiency checks help contract negotiations or provide model checks,contracts. Most of them are organized as limited company as public‐private partnership (PPP).
  56. 56. BEST PRACTICES OF ESCOs S C C S O SCOC‐ Germany C‐3: Impact/evaluation enabling factors:• A vital step for the evolution of the ESCO industry driven by theenergy agencies was the establishment of standard procedures anddocuments such as a model contract, an energy performanceretrofitting model and a standard procurement procedure as well t fitti d l d t d d t d llas contracting guidelines in the federal states of Hessen and Berlinfollowed by others; y ;•The financial and technical support for energy efficiency projectsis provided by governmental action (research and developmentprograms,programs loan/funding schemes and incentive programs for schemes,renewable energies) and nongovernmental programs such ascredit programs by eco‐banks;
  57. 57. BEST PRACTICES OF ESCOs S C C S O SCOD‐D Tunisia: D‐1: General characteristics•The energy efficiency program started i T i i a l Th ffi i t t d in Tunisia long ti time ago iin1985, by the creation of the National Agency for Energy Efficiency« ANME »;•The energy audit market in the country is matured with more thanfifty firms having more than a decade of experience;•ESCOs are a new concept in Tunisia which started to appear in2005;2005•Act 2005 defining the mission, operational requirements andobligations of ESCOs ESCOs.
  58. 58. BEST PRACTICES OF ESCOs S C C S O SCOD‐D Tunisia: D‐2: Description of the ESCO industry:• 10 ESCO are operating i th country and only 03 are active i ESCOs ti in the t d l ti indoing ESCO business.•Except one the ESCOs in the country are small or medium scale Except one,private players;• They are service‐related ESCOs; •Activities’s ESCO was limited to the industrial sector;•The ESCOs have undertaken 17 projects with capital costsreaching 7 million USD hi illi USD.
  59. 59. BEST PRACTICES OF ESCOs S C C S O SCOD‐D Tunisia: D‐2: Description of the ESCO industry:• Th ESCO projects i T i i are carried out under th guaranteed The j t in Tunisia i d t d the t dsavings scheme;•The GEF, by the World Bank, has implemented a specific programwhich aims to strengthen and develop the ESCO’s activities inTunisia through: •An additional subsidies for the projects contracted with ESCOs; •Guarantee fund to cover 75% of the loan granted to g customer/ESCO; •Awarness, capacity building and dissemination of the best practices.
  60. 60. BEST PRACTICES OF ESCOs S C C S O SCOD‐D Tunisia: D‐2: Description of the ESCO industry:• Th commercial b k i th country are generally apprehensive The i l banks in the t ll h iof financing EE projects;•Generally, ESCOs have difficulties to obtain credit from banks;A study will be launched this year to evaluate the tunisianexperience and propose solutions to overcome the difficultiesencountered by ESCOs. y
  61. 61. PLAN SOLAIRE TUNISIEN Néji Amaimia