Task XVI Competitive Energy Services http dsm iea

Task XVI ”Competitive Energy Services” http: //dsm. iea. org presented by: Integrating Demand Side Measures into Energy Supply Contracting Models IEA dsm Task XVI expert meeting, New Dehli, April 1 st, 2008 DDI Jan W. Bleyl IEA dsm Task XVI Operating Agent, DI (FH) with support from: Daniel Schinnerl c/o Graz Energy Agency Ltd. Bleyl@Grazer-EA. at, Schinnerl@Grazer-EA. at © Grazer Energieagentur Gmb. H - For requests: bleyl@grazer-ea. at

1 st Thesis Task XVI ”Competitive Energy Services” http: //dsm. iea. org presented by: Any Energy Supply (also with Renewables) should include Energy Efficiency measures in the building/facility! Otherwise we can not meet Kyoto/EU goals. © Grazer Energieagentur Gmb. H - For requests: bleyl@grazer-ea. at 2

Outline Task XVI ”Competitive Energy Services” http: //dsm. iea. org 1. Motivation: Why energy efficiency must be first? And even cost effective? 2. A brief introduction to Energy Contracting 3. Proposal of a new Integral Energy Contracting (IEC) model (Energy Supply + efficiency measures) 4. Announcement of pilot project: Call for ESCos presented by: 5. Summary, conclusions and outlook © Grazer Energieagentur Gmb. H - For requests: bleyl@grazer-ea. at 3

IEA: Demand-side Energy Efficiency plays major role Task XVI ”Competitive Energy Services” http: //dsm. iea. org Reference includes ~ 50 % efficiency improvement s (1970 – 2000) 65 % Demandside efficiency measures, ~ 4 Gt CO 2 presented by: Source: World Energy Outlook 2006: Global Savings in CO 2 Emissions in © Grazer Energieagentur Gmb. H - For requests: bleyl@grazer-ea. at Alternative Policy Scenario Compared with the Reference Secenario 4 the

Global CO 2 Mitigation Cost Curve 2030 (beyond Business As Usual) Negativ Mitigation Cost! © © Graz Energy Agency -Gmb. H - For requests: bleyl@grazer-ea. at Grazer Energieagentur For requests: Bleyl@grazer-ea. at Source: Mc. Kinsey/Vattenfall 2007

Global CO 2 Mitigation Cost Curve 2030 (beyond business as usual) Cofiring biomas s Air Conditioning, Lighting Systems Building Insulation -Gmb. H - For requests: bleyl@grazer-ea. at © © Graz Energy Agency For requests: Bleyl@grazer-ea. at Grazer Energieagentur Source: Mc. Kinsey/Vattenfall 2007

“ 20 -20 -20 until 2020” EU Strategy Facing Climate Change and Security of Supply Task XVI ”Competitive Energy Services” http: //dsm. iea. org Main targets until 2020: ü 20 % reduction of GHG ü 20 % reduction of energy consumption until 2020 ð improving the energy performance of buildings, ð improving the efficiency of the production, transport and distribution of heating and electricity ð minimum efficiency requirements for energy-using appliances presented by: ð awareness-raising amongst consumers about sensible and economic energy use ü Increasing of renewable energies up to 20 % of energy mix © Grazer Energieagentur Gmb. H - For requests: bleyl@grazer-ea. at 7

2 nd Thesis Task XVI ”Competitive Energy Services” http: //dsm. iea. org Energy Supply Contracting combined with building efficiency measures could do the job (Integral Energy Contracting) presented by: © Grazer Energieagentur Gmb. H - For requests: bleyl@grazer-ea. at 8

Energy-Contracting: A modular Package with Success Guarantees 2. Financing, Subsidies 3. Detailed planning, Construction, Initial start up 1. Project development, Rough planning (Functional) Specs. Tendering Added value: Service Package „Energy. Contracting“ Function-, performance and price guarrantees ! 4. Operat. & mainten. , Troubleshooting, Optimization, User motivation 5. Fuel purchase Outsourcing of commercial and technical performance risks ! => Energy-Contracting is the guarantee, that the overall system performs to specifications ! Over the whole contract term ! © Grazer Energieagentur Gmb. H - For requests: bleyl@grazer-ea. at © Grazer Gmb. H - For requests: bleyl@grazer-ea. at

Typical meausres Value chaine Business models Integral Energy Contracting Model Standard ENERGY SUPPLIER (UTILITY) Primary energy Secondary/ final energy coal, natural gas, crude heating oil, electricity, … district heating, … ENERGY SUPPLY CONTRACTING (ESC) Final Energy => M Wh replacing boilers, local heating networks, biomass heating, CHP plants, solar systems, … © Grazer Energieagentur Gmb. H - For requests: bleyl@grazer-ea. at ENERGY PERFORMANCE CONTRACTING (EPC) Useful Energy => N Wh controls, energy management systems, hydraulic adjustment, efficient lighting, peak load management, thermal insulation, user motivaton …

Integral Energy Contracting - Business Model (in Comparison to Present State / in House) • Operation & maintenanc e • Staff (Substitue) investment • Repair Present state / in house Efficiency investment • Fuel • Electricity Capit al O&M Consumption Total energy costs (€/a) Energy price (guaranteed): • Consumption cost (fuel, electricity) Price adjustment: gas-, oil-, biomass index Basic / service price (guaranteed): • Capital cost: investment and financing • Operation & maintenance cost • Risks and profit Price adjustment: capital-, wage-, maint. index Contract term Quality assurance for efficiency measures (examples) Controlling Proof Performance … © Grazer Energieagentur Gmb. H – © Grazer Energieagentur Gmb. Hdet. bleyl@grazer-ea. at of - For requests: of measuremen For requests: bleyl@grazer-ea. at time

Invest Integral Energy Contracting – Quality Assurance Instruments Energy price Basic / service price Energy Efficiency Quality Assurance, Examples: Controlling of det. Contract term planning Coaching + Contr. of construction Proof of function / Control of quality Energy bookkeeping Performance measurement Yearly verification Annual reports: balances, proposals for EE-measures Contract term © Grazer Energieagentur Gmb. H - For requests: bleyl@grazer-ea. at time

Pilot Project Integrated Energy Contracting Announcement: Call for ESCOs Task XVI ”Competitive Energy Services” Complete refurbishment of 4 heat plants and execution of efficiency measures in buildings ü Total floor area: 10. 500 m 2 ü http: //dsm. iea. org Client: Landesimmobiliengesellschaft Steiermark Landesimmobilien Gmb. H www. LIG-Stmk. at ü ü presented by: Project management: Graz Energy Agency EU TED announcement: „AT-Graz: Dienstleistungen im Energiebereich (2008/S 14 -018018)“ ü Deadline for participation proposals: 20. 02. 08 ü More info: www. grazer-ea. at or Bleyl@grazer-ea. at © Grazer Energieagentur Gmb. H - For requests: bleyl@grazer-ea. at 13

Summary and Conclusions Task XVI ”Competitive Energy Services” http: //dsm. iea. org presented by: 1. Generally: Any building design/refurbishment should first of all focus on all possible demand reduction potentials. Afterwards, the remaining demand should be supplied as efficiently as possible. Especially if renewables are involved. 2. Energy services – delivered by ESCos - are a well proven instrument to implement energy efficiency measures. With guaranteed success. The proposed Integrated Contracting models can facilitate customized packages of energy supply and building efficiency measures. 3. Energy Contracting projects require experience (functional tendering, awarding of contract, model contracts, . . . ). To avoid mistakes, we recommend to cooperate with an experienced consultant (e. g. energy agencies) ð Could your buildings profit from the Energy Contracting approach? © Grazer Energieagentur Gmb. H - For requests: bleyl@grazer-ea. at 14

Outlook Task XVI ”Competitive Energy Services” http: //dsm. iea. org 1. Spread and discuss the new Integrated Energy Contracting concept 2. Find simple but effective quality assurance instruments for efficiency measures 3. Initiate further Integrated Contracting projects, 4. Contribute to the implementation of the climate protection goals (EU 20 -20 -20 by 2020, EE+ESdirective, . . . ) presented by: ð Are you interested in developing a project together? © Grazer Energieagentur Gmb. H - For requests: bleyl@grazer-ea. at 15

The Grazer Energy Agency Team Task XVI ”Competitive Energy Services” http: //dsm. iea. org presented by: Get in touch: office@grazer-ea. at, www. grazer-ea. at © Grazer Energieagentur Gmb. H - For requests: bleyl@grazer-ea. at 16

Reserve Task XVI ”Competitive Energy Services” http: //dsm. iea. org presented by: © Grazer Energieagentur Gmb. H - For requests: bleyl@grazer-ea. at 17

Supply-Contracting + EE-measures Task XVI ”Competitive Energy Services” http: //dsm. iea. org presented by: © Grazer Energieagentur Gmb. H - For requests: bleyl@grazer-ea. at 18

Financing modules and sources Task XVI ”Competitive Energy Services” http: //dsm. iea. org Financing can be composed from the following instruments: Subsidies for EE-measures ü Future energy cost savings ((Part-)-financing from demand reduction, e. g. „Shared Savings“) ü Building cost allowances or payment of residual values (may be part of awarding competition) ü presented by: ü Increased basic price (may be part of awarding competition) ü Financing with addtional financing partner (Leasing, credit or Forfaiting) ü Financing from own funds © Grazer Energieagentur Gmb. H - For requests: bleyl@grazer-ea. at 19

Quality assurance/ Performance verification for EE – measures by building owner Task XVI ”Competitive Energy Services” http: //dsm. iea. org 1. Terms of reference (functional) for EE-measures 2. Controlling of (detailed) planning by (independant) energy specialist 3. Coaching and control of construction by (independant) energy specialist 4. (Energetic) control of construction quality (Thermografy, Blower Door…) presented by: 5. Energy book keeping (also possible by ESCo) 6. Expertise by (independant) energy specialist (2 nd opinion report) © Grazer Energieagentur Gmb. H - For requests: bleyl@grazer-ea. at 20

Quality assurance/ Performance verification for EE – measures by ESCo Task XVI ”Competitive Energy Services” http: //dsm. iea. org 1. Proof of function e. g. start up-, parameter- and operation protocols 2. One-time verifications: Thermography, Blower Door, … 3. Yearly verifications for efficiency factors, return temperature limitation, compliance with heating curve, … presented by: 4. Obligations for anual reporting: energy balance, comparison with previous consumptions, … proposals for EE-measures 5. Calculative verification © Grazer Energieagentur Gmb. H - For requests: bleyl@grazer-ea. at 21

Overview of concepts Task XVI ”Competitive Energy Services” http: //dsm. iea. org 1. Cost-oriented energy prices (AP) 2. Supply-Ct. + simple EE-measures (LC+EE „light“) 3. Supply-Ct. + comprehensive EE-measures (LC+EE) 4. Supply-Ct. with shared savings (LC+Shared Savings) 5. Performance-Ct simlified (EPC „simple“) presented by: 6. Quality Assurance Instruments / Performance verifi-cation for EE-measures by building owner or ESCo 7. Contracting ≠ Third Party Financing, Financing © Grazer Energieagentur Gmb. H - For requests: bleyl@grazer-ea. at 22

Cost-oriented energy prices (EP) Task XVI ”Competitive Energy Services” Pricing structure: ü http: //dsm. iea. org Energy price = marginal production cost (basically fuel cost). All other cost in basic price Advantages/Disadvantages: + + Better image for Supply Contracting (? ) + presented by: No incentive to sell more energy No mininum purchase quantity + Additional or under consumption are do not affect ESCo profits - disadvantage: High share of basic price (BP) from total energy cost © Grazer Energieagentur Gmb. H - For requests: bleyl@grazer-ea. at 23

Supply-Contracting + simple saving measures (ESC+EE „light“) (1/2) Task XVI ”Competitive Energy Services” Standard SC supplemented with simple demand side saving measures http: //dsm. iea. org ü No savings guarantee but quality assurance instruments for EEmeasures (=> slide quality assurance) ü No (utilization-, price-? , climate-? ) adjustments ü EE-measures are specified in detail or with competition of ideas (functional specifications) (Evaluation of saving proposals with tender evaluation) ü One time performance verification after installation, possibly renewed after 3 years presented by: ü… Examples: Thermostastic valves, hydraulic adjustment, energy book keeping, billing according to consumption, user motivation, … © Grazer Energieagentur Gmb. H - For requests: bleyl@grazer-ea. at 24

Supply-Contracting + simple saving measures (ESC+EE „light“) (2/2) Task XVI ”Competitive Energy Services” http: //dsm. iea. org Pricing structure: ü Service price + energy price (+ Investment cost subsidy) (=> slide business model) Advantages: + Integrated Planing: 1. Reduction of demand => 2. Efficient Supply of remaining demand + guarantees for all inclusive energy prices, function, … + Outsourcing of technical / economic risks to ESCo presented by: + Reduction of interface problems + ESCo is also responsible for operation & maintenance over contract term + Quality assurance easier than with EPC … © Grazer Energieagentur Gmb. H - For requests: bleyl@grazer-ea. at 25

Supply-Contracting + comprehensive saving measures (LC+EE) Task XVI ”Competitive Energy Services” http: //dsm. iea. org Standard SC supplemented with simple demand side saving measures Concept as with LC+EE light … presented by: © Grazer Energieagentur Gmb. H - For requests: bleyl@grazer-ea. at 26

Supply-Ct. with shared savings (LC + Shared Savings) Task XVI ”Competitive Energy Services” Analog to SC + EE: ü No savings guarantee but quality assurance instruments for EE-measures ü No adjustment to baseline ü Functional or detailed specification of measures, … http: //dsm. iea. org Pricing structure : ü presented by: BP + EP + Shared Savings (z. B. 70/30) (+ Co-Financing. ) Advantages/Disadvantages: + Incentives because of performance related components + (Part-) financing from future energy cost savings + … © Grazer Energieagentur Gmb. H - For requests: bleyl@grazer-ea. at 27

Energy Performance-Contracting (EPC) simplified Task XVI ü No adjustemt to utilization ü One-time savings guarantee or quality assurance instruments? ü Price- and climate adjustment? ü Possible guarantees: Technical performance-, Investment-, operation & maintenance-, … ü Analog to SC + EE: Functional or detailed specification of measures, … ü ”Competitive Energy Services” Analogy to Intracting-models http: //dsm. iea. org presented by: Pricing structure: ü Fix Contracting rates (no utilization adjustment) © Grazer Energieagentur Gmb. H - For requests: bleyl@grazer-ea. at 28

Summary and Conclusions (3/3) Task XVI ”Competitive Energy Services” http: //dsm. iea. org 6. Financing can/must be individually arranged from a combination of savings guarantee, investment cost subsidies, third party financing and subsidy programmes. => Differentiate between financial and ESCo service, use ESCo as finance vehicle presented by: © Grazer Energieagentur Gmb. H - For requests: bleyl@grazer-ea. at 29

Summary and Conclusions (2/3) Task XVI ”Competitive Energy Services” http: //dsm. iea. org presented by: 4. Energy-Contracting models as EE-tools will be successful, if we can communicate the added value to the customer (guarantees for all inclusive energy prices, outsourcing of risks, maintenance of equipment over project term, …) 6. EE may not be the driving force for building refurbishment. Non energy benefits (external appearance, space use efficiency, lifting income from rent) may be better for selling. Make shure minimum performance standards are in the To. R (also for sale&lease back projects) 1. combined with the known warrantees and © Grazer Energieagentur Gmb. H - For requests: bleyl@grazer-ea. at 30