News
December 17, 2013

SAA supports the Portuguese Association of Industrial Refrigeration and AC Engineers (EFRIARC)

The main topic of 6 hour seminar was “Renovation and optimisation of energy use with energy auditing” which was attended by 140 people.

Portugal is struggling with more than just massive debt. It must also decide how it is going to deal with meeting all the legislative goals set through the recast EPBD.

The first speaker, Pedro Cabral, the Director General of Energy in Portugal, highlighted how Portugal is looking at future energy systems and planning. He reminded the audience that the wider EU goals, with regards to the building sector are to reduce by 20% primary energy use in the public sector and 20% in the private. He also noted that Portugal had set its own internal target of a 30% saving in the Public Sector. So what does this mean for Portugal?

Firstly the barriers within the energy supply market; caused by the energy suppliers themselves needed to be resolved (although I did not get a clear picture of exactly why the energy market was not working).

In April 2014, a strategy to renew the national building stock through Energy Performance Contracting (EPC) primarily using Energy Service Companies (ESCO’s) will be launched.

Article 5 of the 2012 Energy Efficiency Directive, requires 3% of public building to be renewed yearly and in 2015 the threshold for qualifying buildings will be reduced to 250m2 encompassing even more buildings. Rough calculations have shown that Portugal can achieve good saving by targeting the low hanging fruit of energy efficiency.

Current Actions.

A local scheme called Eco AP is seen as the instrument of choice for Portugal to assess and understand the performance of buildings, act, take measures and store data. It is a barometer from 2011 when the substantial legal framework for such an instrument was put in place.

Pilot projects are currently being established and once the results are seen, they can be used to attract funding in the private sector. The first phase of the pilot project has engaged 11 ministries in getting their buildings assessed. ESCO’s are going to be a key part of the strategy.

Investment from ELEnA (European Local Energy Assistance) will also be forthcoming and there should be an increase in funding from EU for these projects.

The main question from the audience after this talk was based mainly around what does an ESCO contract include and exclude, and what are the penalties from an ESCO if the contact is breached or needs to be adjusted in some way? I could not ascertain a clear answer other than ESCO’s will not supply all the answers to achieving energy efficiency, maybe some solutions will be provided by better education of maintenance engineers.

 

Siemens makes a generally plausible stand for the EPC business model.

Tobias Huber from Siemens Energy Performance Contracting gave his overview on Driving Energy Efficiency with EPC. As Chairman of the European Association of Energy Service Companies (Eu.ESCO), plus good links with eu.bac through his employment with Siemens, he is well placed to understand the challenges facing the European building sector like the financial crisis, government debt levels, energy security, carbon emissions and climate change to mention just a few and to see the business opportunity. Some familiar figures were touted, like 40% of overall energy use is in EU buildings and this can be reduced by 20%.

I did appreciate the rule of thumb; for every 1 euro invested in efficiency measures 2 euros are saved in supply.

Siemens recommends contract periods of between 10 years up to 25 years as these lengths of contracts are required to recoup the upfront investment by the ESCO.

The steps to be taken by an ESCO taking on such a role with a client are to identify and evaluate the energy saving opportunities, then manage the projects from design, installation and maintenance across the contract period.

The EPC process.

  1. Preliminary audit; preliminary study, feasibility study. Identify and evaluate the energy saving opportunities.
  2. Detailed analysis investment grade audit, detailed engineering design.
  3. Implementation. Manage the project from design, installation and maintenance.
  4. Guarantee phase.

A case study of Vellinge in Sweden “Best Euro Energy Service Project” started in 2006 returning a 6300MWh/year reduction in energy use. www.eu-esco.org was just mentioned in passing, but the audience was encouraged to look at it further. (I wonder if the financial details are available via freedom of information act?)

Tobias Huber really wanted the audience to come away with the perspective that procuring Energy Performance Contracting requires a different approach; buying energy saving not equipment.

A key point is that the ESCO retains the large majority of the COST savings achieved over the contract length, so the building owner’s COSTS may not reduce much (if at all – depending on the terms of the EPC agreement it seems) though their energy use will reduce. It is also not clear how much control the building owner has over the provided conditions in their buildings as presumably these will need to be tightly agreed in the contract to enable the ESCO to minimise their risk in the contract. This is not any easy thing to negotiate it seems as it does require trust between both parties.

It appears that potential clients should take expert advice at the start of such agreements to avoid being tied into contractual obligations that might not meet their future business needs.

Tobias suggested that the ESCO approach will probably only work financially for the ESCO for larger portfolios so there is still the question over what happens to all those buildings that don’t fall within the scope of an ESCO solution.

 

Ian Knight’s presentation followed Tobias’ and focused on what building owners’ can now achieve through using the iSERV methodology. Simply by taking a more active role in gathering information on what a building is doing for the owner’s advice and own benefit, significant savings are being made without being tied into a 10 year contract (or longer). This was a sentiment repeated by Ricardo Sa in a later lecture, who showed real local case studies of renovation in Portugal, where using an iSERV type methodology building owners were able to fully benefit from reducing their primary energy bill and were passing this on to their tenants.

Ian noted that once, after an iSERV type process, the low hanging fruit (and probably more) are identified and these are acted upon, then it is probably the right time to invite an ESCO into the building to access the more technically and financially challenging savings. It is possible the ESCO will walk away at this point as the easy savings are no longer there to support the more difficult savings. So to get further savings maybe professional help from a consulting engineering practise and investing in capital equipment can be made at a suitable point when it suits the business. The money saved is then the building owners’, to make their property more attractive to tenants (including themselves!), raise the profile of the building and reap the benefits of their own property.

 

Looking at the energy bill of a building and just by analysing what is going on can save 10%. iSERV is showing a much greater return for the building owner for just a little more effort. However, this might not be sufficient to meet the EU’s requirements for 20% reductions!

 

The ESCO (Energy Savings Companies) approach is supported by the European Commission, lobbied by companies like Siemens, Honeywell, etc. Hopefully ESCO’s competition will sharpen up their offer to potential clients. One way a “win-win” can be made is if the ESCO’s use their bulk purchasing power to get a discount on energy consumed. However, this is a long-term business transaction and the aim in business is always to maximise the profit being made.

 

It appears that for now the ESCO’s business model will expand through lack of knowledge and money on their clients’ behalf. This they are literally banking on.