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Local authorities aggregating ESCO projects: trust and ambition
According to Lieven
Vanstraelen, Co-CEO, Inerginvest, Belgium, who will be speaking at ESCO Europe 2015, one of the most distinct trends in the European ESCO
market today is that of aggregation. A
growing number of projects are coming out, such as Gre-Liège, where aggregation is
being used to kickstart the markets. This trend, which began two years ago, is
even more accentuated today.
Buildings can be pooled together, especially in the case of EPC, into one project and one tender. Aggregating several pools into a bigger energy performance programme is made possible by framework tendering programs that – in the public sector – often use innovative aspects of public tendering law. Pooling of buildings of several local authorities requires a very good coordination of decision processes and extra work around facilitating common project goals, explains Vanstraelen.
“Aggregation … requires a dedicated organisation (the aggregator) that centralises expertise and delivers that to individual local authorities.”
He adds that aggregators need to get help from specialised and experienced consultants, of which very few exist today.
“Working with different local authorities can provide important economies of scale and can also help in aggregating financing solutions. This is often key to get EU funding or attract certain private investors, for whom individual local authorities' projects are sometimes too small. Pooling and aggregation also allows faster market growth and is a key to attract ESCOs and new facilitators to the market.”
Trusted facilitators
Independent public agencies are entities that can help to develop the market in two ways : by facilitating energy efficiency projects – especially EPCs, and by aggregating projects . While the agencies can aggregate, they may need help with the facilitation. The crucial role of facilitators in accompanying energy efficiency projects and programmes, and especially energy performance contracting (EPC) through the various project phases is almost universally recognised now by the relevant players in Europe.
Public actors, like agencies of dedicated facilitators, are generally more trusted than private players, says Vanstraelen. However, expertise is very important and unless public actors have pioneered facilitation, as is the key for example in Germany (e.g. Berlin Energy Agency), Austria (Graz Energy Agency) or Belgium (Fedesco), they may call on private experts.
He says that most markets, where the ESCO-model and energy performance contracting (EPC) projects have been successful, have seen the emergence of public and/or private facilitators who can offer the following:
- The necessary multi-disciplinary (technical, operational, financial and legal) expertise to customers to outsource energy performance projects in buildings
- Provide key resources that are often lacking
- Help identify and lift external and internal barriers
- Help the decision process
- Create trust between customers and energy services providers such as ESCOs
- Have developed tools that are used in projects
- Play a crucial role in finding, structuring and engineering necessary finance
- Anticipation and solving problems
- Standardisation of contracts, methodologies, processes and tools, thereby reducing transaction costs significantly
Increasing ambitions
In terms of a changing market, another trend is towards an increasing number of projects of which the ambition level in terms of energy saving is higher : “up from 25–30% in initial ESCO projects to 40 to 50% percent energy savings aimed at, by including the building envelope itselfˮ.
Vanstraelen is looking forward to meeting new facilitators and aggregators at the annual ESCO Europe conference in early November, and hearing about the latest case studies as well as discovering more about the “increased financing options available to customersˮ.
While ELENA offers grants for technical assistance, which includes facilitation, there are three main ways of financing for the end user: privately; through a financial institution; or via third party financing whereby the ESCO enables this by making a savings guarantee to the bank / financial institution. It is in this last category that there has been a marked increase in options available as private institutions and indeed public authorities favour commercial financing in order to keep the debt off the balance sheet.
Commercial products such as insurance to guarantee the savings are also emerging on the market.
Learn more:
Energy Performance Contracting – case studies from public authorities