ManagEnergy capacity building workshops have primarily focused on energy performance contracting in 2012-2013, in support of DG Energy’s campaign. Nils Daugaard and Ezgi Basar report from the campaign trail and compare market success factors.
For outsourced energy services, The Czech Republic is considered a frontrunner in Europe, while the Croatian market is still in an early stage and in Denmark, the market is rapidly growing. Looking at these three countries gives insight into the different concerns and drivers at every stage of market development.
The Croatian EPC market is in an early stage and there is only one ESCO active in the market. Limited legal framework and public procurement rules are seen as big barriers. Other leading factors are the lack of reliable energy consumption data and the mistrust in ESCOs.
Complicated contractual agreements prepared with unreliable data are not able to guarantee the profit for both the ESCOs and clients, thus leading to failures. Furthermore, the unclear, complex and failed contracts raise the mistrust in ESCOs and create a bad reputation around EPC.
Collaboration, commitment and cultural issues are also emerging concerns – showing that technical risks are not as important as other barriers.
The Danish ESCO and EPC market has boomed in recent years due to an increasing number of ESCO projects in the public sector. Even though there is rapid market growth, there still remains mistrust in the ESCOs which needs to be overcome for further market development.
An important success factor is the high level of competence of local authorities in managing contracts. This competence has been built up as the first EPC in the public sector which has proved successful. Today around 30 municipalities out of a total of 98 are engaged in EPC activities.
Easy access to financial instruments is seen to be relatively important for market success. With the support of national legal framework and the European directives, it is possible to acquire fund and grants for energy efficiency projects.
A key national initiative has been to limit the restriction for taking out loans for EPC projects that Danish municipalities are otherwise subject to.
This way the municipalities have access to ‘soft’ (meaning below market interest rate) or favourable loans (down to 1.5 -2 % interest rate). This factor, together with the increasing confidence and competence in EPC projects as such, has created a positive upward spiral so the EPC projects have increased to a volume of EUR 6-20 million per project and normally include deep renovation to incorporate energy saving measures with long term payback.
The Czech Republic is a frontrunner; the ESCO market in the country is considered mature and the growth is stable with almost 200 projects in place.
Taking all success factors into consideration, it can be seen that the supportive policies and implementing measure incentives are seen to be key to the success of the EPC in Czech Republic.
In addition, the steady rise in the energy costs is supporting the EPC success through ensuring profit through energy savings.
Access to financial instruments and competence of the local authorities in contract management, has also been pointed out as significant contributors to the success story of the EPC in the country.
Overall, the report concludes that policy support is an essential factor for paving the way for energy performance contracting. In less developed markets, the first action should be to establish a favourable legal framework. Access to financial resources is a crucial factor for increasing EPC capacity. Ensuring reliable energy consumption data is important in order to establish trust.
It is important not to forget that capacity building in energy performance contracting is not the only way, but a good solution of increasing the energy efficiency implementations. Various other solutions and plans can be developed in national and international level and each community must find its own route suited to its specific ambitions and circumstances.
Read the full report here
Read about the energy performance contracting campaign
More about energy performance contracting across Europe
EPC articles, workshops, case studies - here