http://www.leonardo-energy.org/webinar/energy-efficiency-programs-and-policies This session is part of the Clean Energy Regulators Initiative Webinar Programme. Theme 8 - Promotion of Energy Efficiency Module 3 - Energy Efficiency Programs and Policies This webinar covers the three main delivery mechanisms that can be incorporated into a national policy to deliver energy savings and reduce greenhouse gas emissions. First, it is presented the importance of having high-level policies and strategies clearly stated by the government, sometimes expressed more formally through enabling legislation on energy efficiency. Then, it is discussed the regulatory path to establish minimum requirements that each targeted stakeholder in the market has to comply with, which would include building codes, minimum energy performance standards (MEPS), energy manager regulations, mandatory disclosure of energy usage and an annual action plan. The discussion follows on how the government can launch support programs for energy efficiency or establish a regulatory framework that would obligate energy utilities to put programs in place, and to deliver energy savings to their customers. Finally, it is presented the market mechanism based on Energy Service Companies that can act as an integrator and catalyst of private investment in the market, and ultimately demonstrate that a market has been completely transformed towards a greener energy sector.

1. 1
Energy Efficiency
Policies, Regulations and Programs
Leonardo Energy
Webinar
Pierre Langlois (planglois@econoler.com)

2. 2
AGENDA
.
1.
Policies
2.
Regulations
3.
Programs

3. 3
EE POLICIES

4. 4
EE POLICIES
.
EE policies express the government’s long term commitment toward a more efficient/carbon-free economy.
›
High-level target
-
EU 2020 climate and energy package: "20-20-20" targets
›
EE policies, strategies, white paper:
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General orientation for government actions
›
EE laws: translate strategies into concrete actions
-
Very detailed document or framework law whereby several sub- regulation will be issued (European Directives)

5. 5
EE REGULATIONS

6. 6
INCENTIVES VS. REGULATIONS
›
Incentives
-
Reduction of upfront cost barrier
-
Payback period improvement
-
ROI improvement
-
Limited market penetration
›Regulations
-Used to eliminate completely inefficient equipment/behaviours from the market : 100% market penetration
-Some regulations can simply facilitate data collection to enable the follow-up of energy indicators

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REGULATORY MECHANISM: STANDARD AND LABELLING
›
Part of the country’s strategy to reduce energy consumption
›
Objectives:
•
Removing inefficient products from the market
•
Promoting the development of efficient technologies
•
Promoting purchase of efficient products
›
May be voluntary or mandatory
›
Labels provide information
›
Comparative or endorsement

8. 8
REGULATORY MECHANISM: STANDARD AND LABELLING
›
The impact of energy-efficiency labels and standards on the distribution of products in the marketplace
Energy-Efficiency Labels and Standards: Guidebook, CLASP, 2005

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REGULATORY MECHANISM: STANDARD AND LABELLING
Source: https://cleanenergysolutions.org/webfm_send/542/
75 countries representing more than 80% of the world’s population had enforced S&L as of 2012.

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REGULATORY MECHANISM: BUILDING CODE
Objective: Minimum standard
›
Prescriptive (U per construction elements) or by performance
›
Labelling program can reward high efficient buildings
Two categories:
›
Thermal standard on envelope
›Code on envelope and equipment
Applied to new buildings and major retrofits

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REGULATORY MECHANISM: BUILDING CODE
Main issue is enforcement.
›In many countries, just enough resources to prepare and enact the code
›No capacity to verify consistent code application
This results in inefficient regulations

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OTHER REGULATORY MECHANISMS
Energy Managers
›
Obligation to nominate an energy manager, issue annual report on energy usage and annual action plan
›
Growing popularity in several countries
›
E.g. Vietnam, Singapore, Switzerland (Geneva), etc. for companies with more than XX employees
Mandatory EE Target
›For energy suppliers or consumers
›Consumers: China’s 18,000 largest enterprises
›Suppliers: White Certificate schemes (France, UK, Italy)

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OTHER REGULATORY MECHANISMS
Energy Consumption Reporting
›
Mainly to help in market efficiency improvement tracking
›
E.g. Australian National Greenhouse and Energy Reporting Act

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EE PROGRAMS

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EE PROGRAMS
EE programs can be
›Programmatic
›Market-based

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RESOURCE ACQUISITION VS. MARKET TRANSFORMATION
Resource acquisition
›
Basically paying to generate some kWh savings
›
There is little concern to transform the market, which means market barriers will remain
›
Focused on using incentives

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RESOURCE ACQUISITION VS. MARKET TRANSFORMATION
Market transformation
›
Program aimed at a long-term adoption of EE technologies
›
Profound alteration of the market
Source:NEEA’s Approach to Market Transformation, 2012

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PROGRAMMATIC OPTIONS
›
Demand-Side Management or Demand Response programs
›
Which program should be used? Should it be voluntary or mandatory?
Time
Market penetration of EE technology
Innovation
Penetration enhancement
Consolidation
Research and Development
Voluntary
Mandatory

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PROGRAMMATIC OPTIONS
Behavioural programs
›
Focused on inducing changes in behaviour.
›
Emerging as an interesting alternative
›
Program managers used to favour “hard” programs that were easier to measure.
›
Concerns about savings sustainability

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PROGRAMMATIC OPTIONS
Educational initiatives and training
›
Education mostly targets the next generation of citizens who are in school (a the primary and secondary levels).
›
Training is often required to properly design, install and maintain technology.
›
Training can focus on intermediaries (energy audits, measurement and verification of savings, etc.).

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PROGRAMMATIC OPTIONS
Funding support program
›
Alternative to subsidies
›
Emerging schemes include PACE (Property Assessed Clean Energy), on-bill financing or off-bill financing.

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PROGRAMMATIC OPTIONS
Source:Commercial PACE Financing, US DOE, 2013

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INNOVATIVE FINANCING SCHEMES COMPARATIVE ANALYSIS
Financing Model
Property Assessed Clean Energy (PACE)
On-Bill Financing/ Repayment (OBF/OBR)
Market Penetration
Low
Low
Target Market Segment
Residential, commercial
Residential, commercial and industrial
Balance Sheet
Undetermined
On or off
Typical Project Size
$2,000-$2.5 million
$5,000-$350,000
Allows for Expensive Retrofit
Yes
No
Repayment Method
Property assessment
Via energy bills
Security/Collateral
Assessment lien
Equipment; service Termination
Responsibility for Utility Bills
Customer
Customer

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PROGRAMMATIC OPTIONS
Improvement of program effectiveness
›
Increasing delivered savings compared to administrative effort
›
E.g. Hydro-Québec’s Buildings Program:
›
An additional incentive is offered if the proposed project includes a bundle of EE measures rather than single measures
›
The more comprehensive the program, the higher the bonus on subsidies

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PROGRAMMATIC OPTIONS
Best practices for program evaluation
›
Sufficient resources are needed to perform primary market research. Simply checking formulas in the program’s database brings little value to evaluate the program’s cost effectiveness
›
Huge range of program evaluation impacts from nil to 6% of the program cost
Financing of EE programs
›Mostly relies on schemes under which, ultimately, the customers have to pay
›Financed through a small increase in energy cost

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NEW TREND IN PROGRAMMATIC APPROACH
›
Subcontract energy blocks in kWh or kW to private companies (integrators) to generate savings
›
Governments or utilities do not have to care about program design and implementation: the integrator is responsible for demonstrating the savings
›
Approach between institutional EE programs and market mechanism

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MARKET-BASED MECHANISM: ENERGY PERFORMANCE CONTRACTING (EPC)
EPC Approach

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MARKET-BASED MECHANISM: ENERGY PERFORMANCE CONTRACTING
Energy efficiency market in US
ESCOs contribution expected to increase by more than 50%
Source : IEA Energy Efficiency Market Report 2013

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MARKET-BASED MECHANISM: ENERGY PERFORMANCE CONTRACTING
›
North America
-
USA: $6-7 billion/year (mainly public sector)
-
Canada: $0.5 billion/year (mainly public sector)
-
McKinsey estimates the potential to be $520 billion over 10 years
›
Europe
-
Germany: $3.9 billion/year (all sectors)
›
Asia
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China: $4.25 billion/year (mainly private sector)
-
South Korea: 150 active ESCOs (mainly industrial sector)
-
Pike River Research forecasts $3 billion in 2009 to $18.5 billion in 2016
Markets where the ESCO model hasn’t expanded yet
›
Brazil: $0.1 billion/year
›
India: Marginal
›
Indonesia: Immaterial

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MARKET-BASED MECHANISM: EPC: SUPER ESCO
›
Interface between clients and ESCOs to address:
-
Public procurement and financing issues
-
Reduction of transactions costs
SUPER ESCO
ESCO
ESCO
ESCO

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MARKET-BASED MECHANISM: EPC SUPPORT MECHANISMS
›
Adaptation of legal and regulatory frameworks to use concepts, such as:
-
Long-term contracting
-
Private sector financing
-
Procurement procedures not relying on a least cost approach
-
Taxation issues
›
Promotion mechanisms covers a wide range of actions, such as:
-
Awareness raising and information dissemination
-
Standardized tools
-
Technical assistance
-
Registry and recognition
-
Financing instruments

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CONCLUSION
.
1.
Policies, regulations and programs are among the available tools to achieve the same objective
2.
They can either be simple or complex
3.
They can be use separately or jointly
4.
Alignment of the various uses for each tool increases the chances of increased effectiveness and better results
5.
Each tool needs to be tailored to its specific environment

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THANK YOU Pierre Langlois planglois@econoler.com www.econoler.com