Regional Workshop “NEEAP Development in the Arab region: Monitoring and Evaluation Methodology” December 11th, 2012

1. This project is funded by the European Union
The role of ESCO in the process of recovering
energy saving potentials – experiences
gathered in selected countries
Dr. Kurt Wiesegart,
MED ENEC
Workshop on the ESCO Market –
Barriers and Support Mechanism
European Commission
Sana‘a Dec 11, 2012 ww.med-enec.com

2. MED ENEC
This project is funded by the European Union
Energy Efficiency in the Construction Sector
in Mediterranean Countries
www.med-enec.com 2

3. MED ENEC Activity Overview
This project is funded by the European Union
Financing ESCO Development
NEEAP
Development
Awareness
EE Building Codes
Campaign
EE Building
Projects
www.med-enec.eu 3

4. MED ENEC Activity Overview
This project is funded by the European Union
NEEAPs developped for: Under
- Lebanon discussion:
- Palastine - Morocco
- Jordan - Algeria
NEEAP
Development
www.med-enec.eu 4

5. MED ENEC Activity Overview
This project is funded by the European Union
Developping
- A Roadmap for EE Building
Codes and its
implementation
- A NAMA for the Building
Sector LEB
EE Building Codes
www.med-enec.eu 5

6. MED ENEC Activity Overview
This project is funded by the European Union
Developping a Roadmap for
ESCO Development
Regulation and Certification
of Energy Service Companies
Conducting Energy Audit
and ESCO Training WSs
Cooperating with the
EUREM Programme
www.med-enec.eu 6

7. End Use Electricity Efficiency
This project is funded by the European Union
End use =
Input 100 0.8 !!!!
η= <42 η= <97 η= <94 η= 2
Efficacy 20 lm/W
Overall luminous
efficiency 2%
www.med-enec.com 7

8. EE the primar solution for
energy supply problems This project is funded by the European Union
…being the
cleanest „energy source“, and
- the cheapest
and it
- Contributes to Independence of energy imports, or: ensures
more (primary) energy for exports (export income)
it
- Creates employment
thus
- Contributs to the overall economic development
www.med-enec.eu

9. Energy Efficiency
makes money! This project is funded by the European Union
…. for the stakeholders (customers) involved and for
the country‘s government!
A well functioning ESCO business is one of the most
important measures to recover the huge sources of
energy efficiency in a country.
www.med-enec.com

10. What is an „ESCO“ This project is funded by the European Union
- Energy Contracting – labled as ESCO (Energy Service Co) – is a
comprehensive energy service concept… to minimized project
cycle cost
- Typically: an ESCO acts as general contractor and implements a
customized energy efficiency service package
- Key features: ESCO remuneration is normally performance based
– EPC Energy Performance Contract: It guarantees the outcome
and all inclunsive cost of the services, takes over commercial as
well as technical implementation and operation risks over the
whole project term
www.med-enec.com

11. ESCO and NEEAP
This project is funded by the European Union
ESCO activities belong to the
major measures
to implement a
National Energy Efficiency Actions Plan
www.med-enec.com

12. Classification of ESCOs
This project is funded by the European Union
Basic models of independent ESCOs
1. Building equipment manufacturers-ESCOs owned
by bldg equipment or control manufacturers
2. Utility companies-ESCOs owned by electric or gas
utilities
- Energy or engineering company ESCOs
According to their marketing structure/approach:
A) Technologies
B) Vertical markets
C) Utility / energy suppliers
www.med-enec.com

13. ESCO – Full Service Model
Shared Savings EPC Model This project is funded by the European Union
Financial Institution
Repayment of
Loan portion of savings
share
Project development,
financing and
implementation
ESCO Client / End User
Payment based on
saving share
www.med-enec.com 13

14. ESCO – Part Service Model
Garanteed Savings EPC Model This project is funded by the European Union
Financial Institution
Arrange
Repayment with Financing
Loan funds according
to EPC
Project development and
implementation
Client / End User ESCO
Payment for services
according to EPC
Savings
Guarantee
www.med-enec.com 14

15. ESCO – Basic Characteristics This project is funded by the European Union
• ESCO model offers an appealing, market-based
approach to energy efficiency project
development
• Various ESCO Models are in use – also in
developing countries; eg. India: approx 20 larger
ESCOs are working on a energy performance
contracting business model
• In China meanwhile several hundert companies
are registered
• Some Co‘s already well established. However –
most of the companies (India) are very small
www.med-enec.com 15

16. ESCO – Basic Requirements This project is funded by the European Union
The development of an „ESCO market“ requests certain frame conditions
• The committment of the goverment to go for EE – in different sectors of the economy –
industry, buildings, transport,..
– Only in a few of the ENPI countries
• A energy pricing system which reflects the real costs of energy
– Not the case in most of the ENPI countries
• A certain development status of the EE market maturity - beside a.m. issues:
– Human ressources: Qualified staff to conduct the ESCO business
• Master courses in EE, courses for further training of engineers, technicians,..
– Banks and banking staff who is aware of the potential energy saving business
• A (total) gap in most developing countries
– A responsibility system for economic performance
• Not the case in most of the state owned companies, also not in public institutions/buildings
etc)
– Laws, rules, regulations supporting energy savings
• e.g. emission limits, EE building codes mandatory)
– A medium/long term plan of the Gvmt to mitigate climate change challenges
• e.g. a NEEAP, energy consumption reduction targets,…
– The committment of local institutions to EE measures and financing (e.g. China)
www.med-enec.com 16

17. Impediments for recovering
the „saving energy“ source This project is funded by the European Union
- Government commitment and support
- Awareness of policy decision makers
- Regulations (e.g. for ESCO Certification Schemes)
- Incentives (tax reduction, revolving fundes,….)
- Financing
- Ignorance (lack of experience) of banks and financial
institutions
- Lack of financial sources
- Lack of awareness of customers
- In many countries: Energy prices (energy subsidies)
www.med-enec.com

18. Items to support
ESCO development This project is funded by the European Union
Regulatory support, e.g.
- Rules and regulations for certification
- Develop criteria for ESCOs
- An authorized agency to provide support
- A certification body to be in place
- Cooperation with donor entities
Financial support , e.g.
- Tax incentives (incl import tax)
- Provide Fund (e.g. for start-up phase)
- Provide Guarantees (for funds, for ESCO investment,….)
www.med-enec.com

19. Financing in Emerging Markets
This project is funded by the European Union
- During last decade comprehensive support by MDBs to
support development of ESCO business
- Progress differs from country to country, in general it is
however limited
- Limited to too many obstacles – regarding institutional
set-up, financing,…
- Owners understanding of EE measures
- Complexity of EPC projects
- Reluctance of financing/funding institutions for EE
projects
www.med-enec.com

20. Selected Countries
This project is funded by the European Union
Experience in selected countries
- US
- Germany
- Tunisia
- China
www.med-enec.com

21. ESCO Development Worldwide
This project is funded by the European Union
- More than 50 countries have or are about to
develop ESCOs
- Development slow and hampered by impediments
- No unique understanding of the category ESCO
business in the countries
- Accordingly: no confirmed statistical data – neither
on the number of ESCOs nor their turnover
www.med-enec.com

22. Example: US
This project is funded by the European Union
- Different development stages
- EPC is growing now by 20% annually
- In 2011 ESCO total revenues 6-7 bio USD
- 70% of the ESCO business are performanced based
- Limitations and bottlenecks
Markets:
- Strong support of the Gvmt
- Approx 90% of project implemented in public facilities
- Technology is available
- „Competitive selection processes“
- Role of state energy offices
- Problems whith new laws or budget deficits
www.med-enec.com

23. Example: Germany
This project is funded by the European Union
- Germany is the leading market in ESCO business in Europe
- ESCO development started in the early 90s
- Since mid 90s independent intermediaries (agencies) on state level
- Hessia, e.g.f, developed model contracts.
- Number of ESCOs 250 to 500, contracting value (2011) Euro 3 Bill.
- Remarkable: The ESCO business more than 40 % provided by utilities
- Two major Associations supporting ESCO business
- Sectors: residental sector (60%) of the market; public sector (15%; EPC
contracts); industrial and commercial projects (20%)
Impediments:
- EE services still appear as low-interst-products / Lack of credit rating of small ESCOs
/In public sector: public budget restrictions procurement / The pricing and tariffs of
the German Renewables Feed-in Act power generation / EC Directive 32/2006
Germany refused to follow / The BfEE (Bundesstelle fuer Energieeffizienz) founded
in 2010
www.med-enec.com

24. Example: Tunisia
This project is funded by the European Union
- First ESCO in 1999 (Econoler and three different banks)
- The first legal recognition of ESCO activities energy efficiency law 2004
- ESCO concept supported by international donors – PEEI 2005
- The five year pilot phase implementation of 125 projects
Markets
- Contracts between 2006 and 2010 totaled USD 16 Mio
- Most projects imiplemented in the industrial sector
- Facilitator: ANME as a State Agency
- Guarantee fund provided by PEEI (2010) to promote EPC and
encourage ESCOs.
Governmental Actions
- A legal framework supporting since 2004, Several other decrees 2005
- PEEI provided support
- Development of creditlines with donors
www.med-enec.com

25. Example: PR China
This project is funded by the European Union
- EPC concept started in 1998 (World Bank)
- From 2002 rapid development of ESCOs in 2010
turnover USD 4.25 bill; No of 428; 2011: 1700)
- Gvmt support: taxation, subsidies,…
- Contracts: EPC contracts mainly
- Mainly corporate clients (industries, commercial bldgs, heat
service co‘s,…)
Government Actions
- Strong committment! (Policy measures, financial support,
cooperation with int.Donors
- Promoting EPC a good example for others
www.med-enec.com

26. This project is funded by the European Union
Thanks for your Attention
!ً‫شكراً جزيل‬
www.med-enec.com
MED-ENEC
Project Office, Cairo, Egypt
7 Tag El-Din El-Soubky Street
Tel. +2 24183064
Kurt.Wiesegart@giz.de
www.med-enec.com 26