pu-benefs final technical report

Regional Market Preparation for Energy Efficiency services in Public Buildings

Supported by

Project N° EIE/04/006/S07.39512

FINAL REPORT

September 2007

Coordinator Reinhard SIX

RHONALPENERGIE-ENVIRONNEMENT France

Project website : www.pubenefs.org

PU-BENEFS Energy efficiency services for public bodies

Project partners and report authors Reinhard Six, Laurent Chanussot, Jean Leroy, Claire Morand, Rhônalpénergie Environnement (RAEE), France, Project coordinator Project web gateway : www.pubenefs.org Project web page : www.service-energie.org Christiane Egger, Christine Öhlinger, Gabriele Aicher, O.Ö. Energiesparverband (ESV), Austria Project web page : http://www.esv.or.at/esv/index.php?id=1418&L=0 Marcello Antinucci, Lisa Sentimenti, Agenzia per l’Energia e lo Sviluppo Sostenibile di Modena (AESS), Italy Project web page : http://www.aess-modena.it/ Dr Crispin D Webber, Alexander Bruce, Thames Energy Limited (TEL) (has substituted North East London Energy Efficiency Advice Centre (NELEEAC)), Great Britain Project web page : www.lessenergy.co.uk\NELEEAC_energy_services_PU_BENEFS.htm Manuel Swärd, Energi Kontor Sydost (ESS), Sweden Project web page : www.energikontor-so.com Ruediger Lohse, Klimaschutz- und Energieagentur Baden-Württemberg GmbH (KEA), Germany Project web page : http://www.keabw.de/index.php?id=90 Asko Ojaniemi, Jyväskylä Innovation Oy (JIO) (has changed name from Jyväskylä Science Park (JSP)), Finland Project web page : http://kesto.finbioenergy.fi/pu-benefs Carlos Baste, Eulalia Vehils, Institut Català Energia (ICAEN), Spain Project web page : http://www.icaen.net/pubenefs/index.htm Legal disclaimer The sole responsibility for the content of this report lies with the authors. It does not necessarily reflect the opinion of the European Communities. The European Commission is not responsible for any use that may be made of the information contained therein.


CONTENTS 1. FINAL REPORT SUMMARY 3

2. INTRODUCTION AND OBJECTIVES OF THE PROJECT 3

3. COUNTRY SPECIFIC FRAMEWORK CONDITIONS FOR PUBLIC BODIES TO CARRY OUT ENERGY EFFICIENCY SERVICES 3

4. BEST PRACTICE EXAMPLES FOR ENERGY EFFICIENCY SERVICES FOR PUBLIC BODIES IN EIGHT EUROPEAN COUNTRIES 3

5. RESULTS OF CARRIED OUT FEASIBILITY STUDIES 3

6. DESIGN OF CONTRACTS FOR ENERGY EFFICIENCY SERVICES 3

7. TOOLS FOR FACILITATING THE REPLICATION OF ENERGY EFFICIENCY SERVICES 3

8. CONCEPTION OF EFFECTIVE TRAINING SEMINARS FOR PUBLIC BODIES AND FEED BACK BY TRAINEES 3

9. SUCCESSFUL IMPLICATION OF MAJOR KEY PLAYERS IN THE PROJECT 3

10. EFFICIENT DISSEMINATION BY TARGETED WORKSHOPS 3

11. LESSONS LEARNT CONCERNING BARRIERS AND OPPORTUNITIES FOR DEVELOPING EES 3

12. ANNEXES 3


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1. Final report summary

1.1 Executive summary Opening of energy markets and use of energy services represents a good opportunity for local authorities to include energy efficiency measures in their management, but several problems can occur, such as lack of knowledge of existing mechanisms, as third party financing, specificities inducing difficulties to implement energy services (legislation, accounting schemes etc), risk of losing the knowledge on the energy consumptions.

This project intended to develop a suitable management framework for assisting public bodies and especially local authorities to implement energy services including energy efficiency, and thus to enhance the market of energy efficiency and energy services, by providing efficient tools to meet the needs of public bodies and facilitating the work of ESCOs. The major outcome of this action is an increased number of public bodies using energy services in the eight participating regions.

The project ran by local and regional energy agencies started with studies on the specificity of public bodies, their legal framework and capacity for third party financing and energy performance contracting in 8 countries (Austria, Finland, France, Germany, Great Britain, Italy, Spain, Sweden). The results of these studies can be found as an English summary on the project dedicated web gateway www.pubenefs.org, which links up to the web pages in the partner countries and regions giving detailed information about the project in the country languages.

In order to prepare the ground and to study the real context feasibility studies were carried out (two per partner). They have identified on the ground the specific problems and solutions for implementing energy services. Energy performance contracting for example is not possible in all the involved countries, so the design needs to be adapted to the specific framework conditions. In a second step the elaboration of adapted specifications have assisted the local authorities for their tenders to implement energy services, allowing having the best offer by ESCOs. The results of these feasibility studies are available on the web portal in an English summary version.

As the quality of contractual relationships is crucial a guideline for designing contracts has been elaborated in a way that public bodies can adapt them rapidly, taking into account the already acquired know-how in Europe. Every partner has designed or adapted the contracts already existing to include energy savings and performance guarantees. The structure and the content of these model contracts can be found on the partner’s web pages.

A special feature in this project was the cooperation with the different target groups and key players necessary for developing the market for energy efficiency services. They have been associated through specific advisory committees, which gave valuable input for the project work during several meetings.

The dissemination of the results was given high priority in view of ensuring an efficient replication of the work carried out. Several tools were produced in the partner languages directed to the target groups like a booklet presenting energy efficiency services and EPC with concrete examples and CD-ROM’s compiling the different project deliverables like the model contract. Organisation of training and dissemination seminars at different levels completed the promotion. In this way this project will be able to increase the number of public bodies and local authorities deciding to study and further implement energy services schemes.


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1.1 Summary Opening of energy markets and use of energy services represents a good opportunity for local authorities to include energy efficiency measures in their management, but several problems can occur, such as lack of knowledge of existing mechanisms, as third party financing, specificities inducing difficulties to implement energy services (legislation, accounting schemes etc), risk of losing the knowledge on the energy consumptions.

This project intended to develop a suitable management framework for assisting public bodies and especially local authorities to implement energy services including energy efficiency, and thus to enhance the market of energy efficiency and energy services, by providing efficient tools to meet the needs of public bodies and facilitating the work of ESCOs.

The major outcome of this action is an increased number of public bodies using energy services in the eight participating regions.

Specific framework conditions for implementation of energy services with focus on public bodies The project ran by local and regional energy agencies started with studies on the specificity of public bodies, their legal framework and capacity for third party finance and energy performance contracting in 8 countries (Austria, Finland, France, Germany, Great Britain, Italy, Spain, Sweden). The studies of the public bodies knowledge and experiences of energy services and performance contracting, shows substantial differences between the partners and their countries. There are several factors influencing the development such as legislation and liberalisation together with the level of autonomy for public bodies and political decision-making. However, the partners input and findings in the case studies, indicates that the actual structural and legislative hindrances seems to be somewhat overestimated, and that countries and regions with an active business sector and a tradition of public private partnership seems to find ways of implementing energy services, even with insufficient legal and administrative structures. Types of energy services used Breaking down the general information of developments, and studying what specific types of services that those public bodies that do have experiences are carrying out, reveals a relatively concordant picture. In the more developed markets are the type of contracts used based on client preferences, while the contracts in the least developed markets seems to be based on what type of companies are operating in the market.


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The graph below is not intended to be too determinative, but to give an overview of the maturity and knowledge of public bodies in the partner’s countries (in 2005).

How to move further Regardless of the current stage of development, each of the partners regions and countries needs to move further in improving the energy service market. The needs are both structural and information oriented, and it will be necessary to pair structural changes with substantial information and different dissemination activities, in order to stimulate and encourage the relatively cautious public sectors to be more proactive. There is a need for more skilled and proactive public bodies in order to balance business negotiations and to tailor the energy services offered to the specific needs and prerequisites of the public bodies in each country. The graph below is not intended to be too determinative, but to give an overview of what types of activities and structural changes that public bodies prioritize in order to improve

General need for an improved Energy Service market

AUT ES FI FR GE IT SE UK

Provision of high quality information X X X X X X

Training and capacity building, inkl references X X X X X X X XRecognised standards for energy service contracts in use

X X X X X

Changed or differently interpreted legislation X1 X2 X3 X4 X5

Coherent approaches from funding agencies X

Increased deregulation

1) Absence of national efficiency regulations, and the separate structures of public budgets2) Different and more attractive schemes for running public tenders3) Article 10 Separation of investment/functional costs, limitation of "cross-contribution"4) Different interpretation/usage of budget split allocations5) More progressive interpretation of the public procurement act and financing guidelines


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Feasibility studies

In order to prepare the ground and to study the real context feasibility studies were carried out (two per partner). They have identified on the ground the specific problems and solutions for implementing energy services. Energy performance contracting for example is not possible in all the involved countries, so the design needs to be adapted to the specific framework conditions. In a second step the elaboration of adapted specifications have assisted the local authorities for their tenders to implement energy services, allowing having the best offer by ESCOs.

The identification and the set up of a co-operation for a feasibility study with local authorities and public bodies has shown a certain delay due to several reasons: lack of interest, changing political context, change of responsible persons or changing priority in the building management services. The approach for carrying out these feasibility studies has been different according to the specific country and regional context and the competencies of the project partners. In preparation of the feasibility studies the partner KEA has, with the input of the partner’s, produced a feasibility study guideline, which is available on the PU-BENEFS gateway. Short presentation in English presenting the feasibility studies have been produced by the partners. These are available either on the partner web page (synthesis of feasibility studies) and on the PU-BENEFS gateway (summary of feasibility studies in English and the synthesis of these studies). Some main findings can be indicated:

• mainly involved are local authorities, three hospitals and one university

• the sectors concerned are in three cases school buildings, public lighting in two cases, leisure centres and swimming pools in four cases and hospitals in three cases

Type of Energy Service contracts and activities (When used)


Energy Performance Contracting X * X * X x X x

Profit Sharing and Shared saving contracts * x x x x * x x

Third Party Financing contracts * * *1 * * x * x

Leasing contracts * * * * * * x *

X = Commonly usedX = Less commonly used* = Non or very limited usage

1) Increase is foreseen due to new legislation


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• the main focus of the needs looked at are: heating, control, street lighting, CHP and in three cases also biomass boilers

• the proposed tools of energy services are in the majority EPC and in three cases with TPF. An exception is France where for one case a combination of O&M guarantee contract and leasing is proposed and the second case implements a new public-private-partnership contract tool.

• Public lighting systems seem to have interesting saving potentials. There are remarkable differences in the specific average electricity consumption per light spot and year (560 in Spain, 775 in Italy).

• Acceptance of complex contractual structures, technical measures may be better when a neutral partner such as an energy agency is involved to check the proposed measures of the feasibility study.

• Control systems for heating plants and rooms, the replacement of inefficient boilers, pumps and hot water storage as well as public lighting bodies and bulbs have often been proposed.

• Depending on the prices for primary energy, additional proposals were cogeneration and wood chip boilers. The wood chip boilers still have pay back periods > 12 years.

Contracts design The objectives of this task were to elaborate in the partner countries where necessary model contracts for the purchase of high quality level of energy services, based on the already existing contract models in Europe and the recommendations made by the experienced partners. The coordinating partner TEL developed a guideline for drafting a model contract. The exchange with the partners improved this guideline. The challenge within this task was to produce a flexible document which although having a central format and theme, each partner would have the ability to modify and as such have the opportunity to adapt it to the context of their own country. The contract documentation was developed with the intention mainly to support the reduction programme of CO2 in the environment as well as to reduce the energy costs of the client. For a successful implementation of projects, it is necessary that the respective contract lays down rules for all relations between the client and the ESCO which are resulting from the project and including for example:

• explicit statement of the contract duration • What is to be done in the event of damage or loss (maintenance)? • What is to be done in the case of bankruptcy of a contracting party? • What is to be done if the designated use of the building changes? • Are there provisions for changes of energy prices foreseen? • Guaranteed energy savings and provisions for the allocation of guaranteed cost

savings as well as consequences if the guaranteed savings are not met • Passing the risk and the property • What is to be done if the building is sold?

Based on the exchange during the project meeting and the guideline for a model contract the partners have adapted or developed model contracts taking into account the crucial points listed above and their country specific conditions. These adaptations are available in the country language on the partner web pages and the produced CD ROM. Tools for replication Having in mind the huge information lack within public bodies and particularly local authorities several tools were designed for the promotion of energy efficiency services. In


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order to facilitate the replication of the project and assist the local authorities to really implement energy efficiency services two tools were produced by each partner:

• A brochure with the results, explaining the specificity of public procurement in the field of energy services and including some of the best practices studied

• A CD-ROM with general information about energy efficiency, with the guidelines for feasibility studies and the contract model(s) designed.

• Training seminars for technicians of local authorities These tools are also available on the partner’s web pages. An English version of the booklet with a general presentation of energy efficiency services and some best practices can be downloaded on the project gateway. Successful implication of major key players A special feature in this project was the cooperation with the different target groups and key players necessary for developing the market for energy efficiency services. They have been associated through a specific advisory committee, which tried to involve different sub-groups:

• local authorities and public bodies

• banks, including specific ones for financing energy efficiency

• energy services companies and socio-professional associations

• others members depending on the local context The role of this committee was to accompany the different work phases of the project and give in input in order to improve the studies and tools produced. In addition vary valuable exchange took place between the participants concerning the problems and pitfalls of EPC but also the opportunities and the strength’s of this tool. All of the partners have seized this occasion to create a larger basis for EPC and reach a better of pertinence of the studies and tools produced. Effective dissemination by targeted work shops The main purpose of this project is to increase the number of public bodies using energy efficiency services. The obtained results in the different tasks have been made available and disseminated with a view to encourage the target groups to follow the shown examples and implement energy efficiency services. One very effective dissemination means is the organisation of work shop targeted to an audience of professionals including elected officials, civil servants, technical consultants, ESCOs, banks etc. So in all the partner regions and countries dissemination workshops on “Energy efficiency services in public buildings” have been organised touching some 700 decision makers and technicians. In addition a European seminar was organised in cooperation with the FEDARENE, the European Federation for Regional Energy and Environment Agencies and the Committee of the Region in Brussels attracting more than 150 people. The content of these seminars can be found on the web gateway and the partner web pages. Main lessons learnt and measures needed to improve the situation for EPC During the 30 months of the project duration all the partners were very much involved to promote energy efficiency services for the public bodies and local authorities within the


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territory covered. This presence in the field is very valuable and gives a good opportunity to draw lessons. A synthesis is presented in the following: Setting a favourable environment, information and awareness raising activities

• Encouraging competent energy efficiency management in public bodies • Get attention of decision makers by showing how EPC addresses and solves

eventually their general objectives and challenges (like budget restrictions) • New marketing material is needed such as an “EPC handbook” • Set up catalogues of good practices examples of EPC with local authorities • Facilitate visits and direct exchange with technicians in local authorities

managing successful EPC projects. Training demand

• Training as well the technicians as the decisions makers is in most cases necessary; a good way is to cooperate with the federations or associations of the local authorities or the technicians

Simplification and anchoring of procedure

• The tendering, procurement and contractual processes must be better anchored within a larger part of the customer’s organisation in order to avoid misunderstandings, expectation gaps and internal opposition.

• Giving more attention to the description and recording of the usage of the buildings treated by EPC (e.g. running condition template), thus facilitating the adaptation of the saving objectives in case of modification of the use of the buildings

• Simplification and well structured project development (as shown by Swedish and German partner) should be promoted

Facilitator and sound project development

• The set up of independent advisers, called facilitators, is a very good mean to assist the municipalities in starting real EPC projects (see Upper Austria and Baden-Württemberg)

• Encouraging the cooperation of several municipalities in order to achieve a correct project size (see “building pools” in Germany or UK)

• Special attention needs to be paid to the monitoring of the EPC contract; the local authority has to foresee this right from the beginning; EPC does not mean to outsource the complete energy management

Government support

• Develop a “Definite Public Procurement Guide” for giving guidance and security to the local authorities

• Tackling the VAT issue for EPC by for example reversing the VAT payed for the specific EPC services to the local authorities (in total or partially)

• More and clear support by the different government levels encouraging the use of EPC

• Indicating clearly the interest and usefulness of EPC in the different energy efficiency strategies and plans

• Financial support mechanisms for the starting and market development phase would be of great help: securing the choice of local authorities for EPC, increasing the demand, reducing the transaction costs

European Commission support The readjustment of the EU Directive should promote a more favourable context for the development of EPC by:


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• giving a legitimacy to EPC which will facilitate awareness raising initiatives • support the set up and running of EPC facilitators and clearing house organisations

giving independent and qualified advice • encouraging the simplification of administrative procedures in the Member States

relating to the implementation of EPC • offering a market outlook which will encourage ESCO’s to make proposals to local

authorities 2. Introduction and objectives of the project

Opening of energy markets and use of energy services represents a good opportunity for local authorities to include energy efficiency measures in their management, but several problems can occur, such as lack of knowledge of existing mechanisms, as third party financing, specificities inducing difficulties to implement energy services (legislation, accounting schemes etc), risk of losing the knowledge on the energy consumptions.

This project intended to develop a suitable management framework for assisting public bodies and especially local authorities to implement energy services including energy efficiency, and thus to enhance the market of energy efficiency and energy services, by providing efficient tools to meet the needs of public bodies and facilitating the work of ESCOs. The major outcome of this action is an increased number of public bodies using energy services in the eight participating regions.

The project partners are in the majority regional energy agencies working at the regional level: Name of partner Partner short

name Territory covered

Rhônalpénergie-Environnement RAEE Rhône-Alpes, France Oberösterreicher Energiesparverband ESV Upper Austria Agenzia per l’Energia e lo Sviluppo Sostenibile di Modena

AESS Modena and Emilia-Romagna, Italy

Thames Energy Limited TEL Greater London area, United Kingdom

Energi Kontor Sydost ESS South-East Sweden Klimaschutz- und Energieagentur Baden-Württemberg GmbH

KEA Baden-Württemberg, Germany

Jyväskylä Innovation Oy JIO Central Finland Institut Català Energia ICAEN Catalonia, Spain The content of the final report is described in the following for each chapter. In chapter 3 the country specific framework conditions for public bodies to carry out energy efficiency services are studied. According to a common template all partners analysed the framework conditions in their respective region and country. A synthesis is giving an overview of the different situations. A high importance was given to study best practices concerning energy efficiency services for public bodies in the eight involved European countries (see chapter 4). The objective was to study and find out the conditions of success for such innovative schemes. Each partner has produced 2 case studies, including at least one third party financing scheme. They are highlighting the obstacles that restrict the use of financial instruments and contracts for energy savings in regard to public bodies.


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In order to prepare the ground and to study the real context feasibility studies were carried out (two per partner). They have identified in the field the specific problems and solutions for implementing energy services (see chapter 5). The contractual nature of energy services is a key determinant of its success. It is therefore important to consider and propose models of contracts well adapted to the specificities of public bodies in each region and country (see chapter 6). Having in mind the huge information lack within public bodies and particularly local authorities several tools were designed for the promotion of energy efficiency services. In order to facilitate the replication of the project and assist the local authorities to really implement energy efficiency services two tools were produced: booklet and CD-ROM, which are presented in a concise way in chapter 7. As it was stated already in the beginning the need for training is very high within the technical services of the public bodies. Therefore each partner organised at least on dedicated training seminar for technicians of the local authorities and other interested persons and organisations, which are illustrated in chapter 8. A special feature in this project was the cooperation with the different target groups and key players necessary for developing the market for energy efficiency services. They have been associated through a specific advisory committee by all of the partners. The enriching cooperation and accompaniment is highlighted in chapter 9. The main purpose of this project is to increase the number of public bodies using energy efficiency services. The obtained results in the different tasks have been made available and disseminated with a view to encourage the target groups to follow the shown examples and implement energy efficiency services. One very effective dissemination means is the organisation of work shop targeted to an audience of professionals. The design of these work shops and their outcomes are described in chapter 10. During the 30 months of the project duration all the partners were very much involved to promote energy efficiency services for the public bodies and local authorities within the territory covered. This presence in the field is very valuable and gives a good opportunity to draw lessons. The project partners were solicited to present the lessons learnt in chapter 11.


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3. Country specific framework conditions for public bodies to carry out energy efficiency services

According to a common template all partners analysed the framework conditions for public bodies in their respective countries. A synthesis is giving an overview of the different situations.

3.1 Country synthesis 3.1.1 Different stages of development The studies of the public bodies knowledge and experiences of energy services and performance contracting, shows substantial differences between the partners and their countries. There are several factors influencing the development such as legislation and liberalisation together with the level of autonomy for public bodies and political decision-making. However, the partners input and findings in the case studies, indicates that the actual structural and legislative hindrances seems to be somewhat overestimated, and that countries and regions with an active business sector and a tradition of public private partnership seems to find ways of implementing energy services, even with insufficient legal and administrative structures. The graph below is not intended to be too determinative, but to give an overview of the maturity and knowledge of public bodies in the partner’s countries in the year of 2005. In the more developed markets are the type of contracts used based on client preferences, while the contracts in the least developed markets seems to be based on what type of companies are operating in the market. The graph below is not intended to be too determinative, but to give an overview of the maturity and knowledge of public bodies in the partner’s countries.

Type of Energy Service contracts and activities (When used)


Energy Performance Contracting X * X * X x X x

Profit Sharing and Shared saving contracts * x x x x * x x

Third Party Financing contracts * * *1 * * x * x

Leasing contracts * * * * * * x *

X = Commonly usedX = Less commonly used* = Non or very limited usage

1) Increase is foreseen due to new legislation


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3.1.2 Types of energy services used Breaking down the general information of developments, and studying what specific types of services that those public bodies that do have experiences are carrying out, reveals a relatively concordant picture. 3.1.3 How to move further Regardless of the current stage of development, each of the partners regions and countries needs to move further in improving the energy service market. The needs are both structural and information oriented, and there will be necessary to pair structural changes with substantial information and different dissemination activities, in order to stimulate and encourage the relatively cautious public sectors to be more proactive. There is a need for more skilled and proactive public bodies in order to balance business negotiations and to tailor the energy services offered to the specific needs and prerequisites of the public bodies in each country. The graph below is not intended to be too determinative, but to give an overview of what types of activities and structural changes that public bodies prioritize in order to improve

General need for an improved Energy Service market


Provision of high quality information X X X X X X

Training and capacity building, inkl references X X X X X X X XRecognised standards for energy service contracts in use

X X X X X

Changed or differently interpreted legislation X1 X2 X3 X4 X5

Coherent approaches from funding agencies X

Increased deregulation

1) Absence of national efficiency regulations, and the separate structures of public budgets2) Different and more attractive schemes for running public tenders3) Article 10 Separation of investment/functional costs, limitation of "cross-contribution"4) Different interpretation/usage of budget split allocations5) More progressive interpretation of the public procurement act and financing guidelines


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3.2 Feedback for current and future EU-directives

3.2.1 General findings Even though a majority of the ESCO’s and several of the real estate companies interviewed for the reports and studies expressed an interest in the EU-development, the actual understanding of if and how, their own projects could be interlinked to the EU work was somewhat limited. However, a continued dialogue focused on the implementation of the directive on energy performance in buildings, and the proposed directive on end user efficiency and energy services, revealed three areas where an almost unanimous feedback from the PU-Benefs project could be delivered. 3.2.2 Limited Member State prioritization In an EU perspective it’s notable that EU’s strong focus on PPP and Energy Services doesn’t seems to have affected public authorities in several of the countries. It is therefore essential that EU emphasise more on making Member States ratify for example the Eurostat Guidelines for PPP and dismantle legal and administrative hurdles for Energy Service Contracting and Third Party Financing. These issues are crucial in order to create the necessary multipliers and market based support structures for implementation of current and future EU-directives. The legal and administrative framework for public authorities has been identified in several partner countries as quite important obstacles. These need to be overcome at state level thus involving the national states responsibility. In this issue is Austria, and especially Upper Austria, a promising exception. Also UK and parts of Germany are showing promising tendencies, but the real Member State focus is somewhat limited. 3.2.3 Cost efficient implementation and actual savings The strategies to use and present Energy Service Contracting as a cost efficient approach for interaction and compilation with the directive on energy performance in buildings, seems to be of interest for several real estate companies. Since the energy analysis made within the Energy Service Contracts, often are more detailed and more in depth than the Member State requirements for receiving the certificates, the synergies are obvious. By introducing Energy Services, and especially Energy Performance Contracting, as a method to comply with the directive on energy performance in buildings, will also two other positive effects be reached. The first one is the introduction of a market driven implementation of EU directives. The ESCO’s are keen on getting in and analysing different building stocks in search for projects, and will therefore start moving the real estate market forward. The other one is the possibility to ensure that the energy savings potentials stated in the analysis and certificates, now also can be implemented on a favourable and cost neutral basis for the real estate owners. Another interesting approach for municipalities and public real estate owners is the Swedish EPC-projects being successfully implemented without outsourcing the operation and maintenance staff. This solution could be of EU interest, since it prevents a lot of internal and trade union opposition, that currently limiting the usage and applicability of the energy services among public bodies.


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3.2.4 Paving the way for compliance with saving targets Some real estate owners, especially large public owners in Sweden and Finland, plans to take full leverage of their current Energy Service Contract, in terms of fulfilling both the requirements of the current directive of energy performance in building, and compliance with the outcome of the proposed directive of end user efficiency and energy services.

Since it’s lightly that the public sector will carry a wider responsibility and higher savings targets in the directive, it’s now essential for larger public real estate owners to be able to submit evidence, clearly stating the savings achieved within their premises.

Though Energy Performance Contracting projects are implemented with savings guarantees is the actual energy consumption and achieved savings therefore followed up and analysed thoroughly. Real estate owners carrying out EPC projects, are therefore simultaneously also paving the way for their own smooth compliance with the future saving targets.

However, an important prerequisite for Energy Performance Contracting ability to support the proposed directive, and pave the way for real savings, is need for high quality and credibility of the services delivered.

Even though European standards for Energy Performance Contracting, probably will take time to establish, due to the Member States different legal and administrative framework, there’s a pressing need for competition neutral guidelines and administrative capacity building among the public bodies.

The need for frameworks and funds supporting a high quality introduction of Energy Services, as stated in FEDARENE’s second position paper on the directive of end user efficiency and energy services, is partially being achieved through the PU-Benefs and other European and national projects, but there must be a higher and broader focus in the Member States.

The supporting frameworks are essential to prevent the risk of backlashes and diminished faith in Energy Services and Energy Performance Contracting, that at times happened in the US market.


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3.3. Country reports

3.3.1 Country: Austria

OVERVIEW

THE HISTORICAL SITUATION IN UPPER AUSTRIA Energy efficiency and renewable energy sources are since many years cornerstones of the Upper Austrian energy policy. In 1993 the first Upper Austrian energy strategy and action plan was passed (1994-2000). The implementation was very successful and among others it was possible to increase energy efficiency of new buildings (one family homes) by 30%. Energy efficiency in this period was increased by 1% annually. Upper Austria has recently also passed an energy efficiency strategy ("Energie Star 2010") with the aim to increase energy efficiency by 1%, by 1.5% in the public sector respectively. The buildings sector has a major role to play in achieving these goals. As the building sector is a complex one which is quite resistant to change, there are a number of measures, comprising legal, financial and information measures being implemented in order to tackle sustainable energy use in buildings and to bring about a real change in investment and behaviour. At the very core of all the building activities is the calculation of an energy performance indicator, an energy performance indicator for 50,000 building has been calculated in the last 12 years. This energy performance indicator is the basis for an energy certificate, of which again over 50,000 have been issued in the last decade. Additionally there are a number of subsidy programmes to motivate home owners to invest in higher energy standards. In 1998, Upper Austria started a support programme to promote energy performance contracting especially in public buildings. In the year 2002 the programme was extended supporting now also companies and not only energy efficiency measures but also investment in renewable energy plants. So far about 50 energy performance contracting projects were supported. The programme results are also very good in terms of economy: with about 1 million Euro subsidy, investment of about 12 million Euros was triggered.

THE GENERAL SITUATION FOR PUBLIC BODIES Among the implementation measures to achieve the 1.5% target foreseen in the Upper Austrian Energy Efficiency Strategy for the public sector are a number of activities foreseen, e.g. energy accounting and energy management for municipalities, energy advice for communities, integration of energy efficiency criteria in the procurement procedures, retrofitting. The previous 2-3 years have also seen significant sustainable energy activities for public buildings as well. The public building sector is of specific importance but also one of the most difficult ones - often the structure of the institutions (different responsibilities), procurement rules and other bureaucratic barriers prevent things from happening. It also took some time in Upper Austria to get things moving, but now there is a whole package of activities. There are minimum energy performance requirements for the construction of new buildings and for retrofitting (as for the housing sector) and there is a legal obligation that renewable energy sources have to be given priority for heating and hot water supply in public buildings ("priority for renewables for heating").


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To ensure that these rules are followed, public funding was linked to it: municipalities in our region get the money for their public buildings mostly from the region. And this funding now is only given if the energy standards are met and if renewables are used (or if not, they have to have a very good explanation why not). More and more energy performance requirements are also put into the tender documents for public buildings and in many cases O.Ö. Energiesparverband supports municipalities in the preparation of these tender documents. There is a legal obligation for energy accounting for municipalities and there is already since 1994 an annual benchmarking and monitoring carried out for all public buildings of the regional government. One of the important activities in the building sector to trigger energy efficiency in public buildings is energy performance contracting. Although it took some time to make energy performance contracting well known among public bodies, with the help of the Upper Austrian support programme, the instrument is now quite well established in the region. Most municipalities are familiar with the scheme energy performance contracting and about 50 municipalities have already implemented a contracting project. The implemented projects mainly concern retrofitting of public street lighting and of public buildings (modernisation of heating systems, insulation of buildings, more efficient lighting etc.). Despite the increasing number of successfully implemented EPC-projects, third party financing is so far hardly ever used to finance the installation of renewable energy plants in municipalities.

THE GENERAL SITUATION FOR THE ENERGY SERVICE PROVIDERS The Upper Austrian Energy Performance Contracting Programme helped very much to establish a market for energy service providers. With the support of the programme, the first contracting projects were already implemented in 1999. The programme combines a financial element (subsidy) with comprehensive information for the ESCO and for the client. A balanced approach was carried out to help both sides - the ESCO and the clients. Especially the energy advice given in the frame of the programme by an independent agency (O.Ö. Energiesparverband) helped very much to establish confidence in the contracting instrument. At the beginning of the market development, it was also very helpful for the ESCO to get support and advice when implementing their first contracting project, for example, the contracts were reviewed and critical questions discussed with both contract partners. At the beginning of the market development, very often several advice sessions for every project were given by O.Ö. Energiesparverband. People applying for the support are guided by O.Ö. Energiesparverband and are therefore able to benefit from the experience of earlier projects. The combination of financial incentive with an information element (advice from experts) is one of the key factors for achieving successful implemented projects and for establishing a broad contracting market in the region. Aim of the support programme was not only to financially support contracting projects, but also to improve the quality of the services offered by the ESCO. This quality approach turned


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out to be very successful, a recent survey among municipalities who implemented a contracting project showed that the far majority of them is very satisfied with the project. The quality approach was also very beneficial for the ESCOs and helped to make them more professional and to ensure high quality of their services. Presently a number of ESCOs offer their services in Upper Austria. O.Ö. Energiesparverband offers on its website a service which presents the most active ESCOs. In order to be named on the website, the ESCO has to deliver quotations of references and the contract is checked by O.Ö. Energiesparverband. Presently 15 ESCOS are listed and in total more than 30 ESCOs are established which offer services in Upper Austria.

THE GENERAL NEEDS FOR AN IMPROVED ENERGY SERVICES MARKET Public bodies play an important role in increasing overall energy efficiency of our society and could demonstrate energy efficiency solutions by going ahead and giving best practice examples for the general public. Main obstacles which prevent energy efficiency projects to be implemented are above all: high investment costs and lack of public money, administrative barriers, lack of trust in Contracting. Although energy performance contracting could therefore play an important role, it took quite a time to successfully implement the first contracting projects in municipalities. With the help of best practice examples and a growing number of successfully implemented projects, the situation has improved in the field of energy performance contracting. However, in the field of financing renewable energy plants by TPF the market development is still, despite large potential, very slow. Above all awareness raising and information is needed to overcome this situation.

CURRENT PREREQUISITES FOR PUBLIC BODIES USE OF DIFFERENT TYPES OF ENERGY SERVICES

EPC, ENERGY PERFORMANCE CONTRACTING

Public accountancy: The ESCO owns the installations built under the EPC scheme until the end of the contract period. After termination of the contract, the ownership goes to the municipality that means that during the contract period, the installation is not mentioned in the public accounting.

Public procurement: According to the Austrian regulation for procurement in public bodies (ÖNORM 2050), the ESCO has to be selected by tendering. Very often the procedure is the following:

• first, ESCOs are invited to deliver their references in terms of the planned contracting project

• second p, some of them (~ 3 ) are invited to deliver a detailed offer and the best one is then selected for contract negotiations.


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Public organisation: The main obstacles preventing successful contracting market development are:

• it takes time: despite increased efforts to trigger the market development it took about 4 years in Upper Austria to get the first successful projects started

• confidence needed: it is very difficult to establish confidence in the contracting scheme (people are often sceptical about the win-win situation for both contract parties or don't understand that the ESCO has also to benefit financially)

• complexity: due to the complexity of the contracting scheme it is not so easy for municipality officials to explain and understand how contracting works

• unrealistic expectations: very often contracting is communicated as a "miracle tool" that can solve all energy efficiency problems of municipalities. It is crucial to communicate the benefits of contracting on a serious basis not neglecting the disadvantages and the limited field of application

• loss of influence: the fear to loose influence and control over energy related questions prevents from entering projects

• loss of jobs: people responsible for operation and management of installations and buildings within the municipality are very often against contracting because they fear to loose the job or at least influence and control. For a successful implementation of projects it is therefore crucial to involve them right from the beginning and include them in the monitoring or energy management during/after the project

• local added value: very often one argument against contracting is less local added value (if the ESCO concludes the contract for retrofitting buildings).

In addition to these obstacles there are other means of financing energy efficiency projects and renewable energy installations in municipalities established. The most important financing tools are:

• founding a new "association" ("KEG" i.e. a special association under the Austrian law similar to a limited liability company): the benefits for the municipality are that the investment is officially done by this association and does not appear in the municipality's accounting

• leasing: the leasing scheme is already well introduced and known by most people, especially for new public buildings it is a common financing tool

Grouped procurement for energy and/or EPC contracts: One requirement of the contract of the EPC-scheme is that there are 2 partners: the ESCO (supplier) and (for example) a municipality (consumer). The difficulty of the complex EPC contract is to foresee more than 2 contract partners. Although it would in some cases be helpful to achieve the minimum investment (required by the Upper Austrian EPC programme is 40,000 €), to group investment projects in different municipalities, this is hardly ever done. The reason is that implementing projects beyond municipality borders is difficult as every municipality has its own administration. Implementing contracting projects with more than one municipality would therefore require comprehensive contractual provision. That is why normally no "pooling" of projects of different municipalities is carried out. However it is of course possible to "pool" more objects of a municipality and for example retrofit a number of buildings of one public body. This is done frequently. A different situation is given for certain public schools in Austria which are owned by one national association. Here the EPC-scheme is carried out by pooling schools located in different municipalities. As the owner is always one association, this causes no contractual problems.


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PROFIT SHARING (PROJECT AND/OR O&M INCENTIVES) The profit sharing scheme was only used at the beginning of the contracting market development. The general procedure now in EPC projects is that if a higher energy reduction than guaranteed is achieved, only the client (the municipality) benefits financially. The ESCO normally does not take any additional earnings.

THIRD PARTY FINANCING (OFTEN PARTIALLY INCLUDED IN EPC CONTRACTS)

Public accountancy: The installation is owned by the ESCO throughout the whole contract period. After the termination of the contract, it can either be prolonged or the client can purchase the installation (to a reduced price according to the current market value).

Public organisation: Additional obstacles (complementing the ones already mentioned in 2.1) for TPF are:

• no tradition, no best practice examples: the process in Upper Austria started with EPC-projects and therefore so far hardly any TPF projects in municipalities are implemented

• biomass district heating well established: very often there is no necessity to finance biomass heating systems in municipalities because many municipality buildings are connected to biomass district heating installations. In many rural municipalities such networks are established and operated by a local farmers' cooperative.

Leasing Often new public buildings are financed by leasing which means that only the financing and planning is carried out by the contractor. He also carries the risk of functionality. Generally by entering the contract a certain residual value is fixed, after termination of the contract the object can than by purchased.

Public accountancy: The leasing rate is calculated on the basis of the actual investment and (similar to renting objects) the annual rate is shown in the accountancy (expenditure).

CURRENT REGIONAL EPC OR THIRD PARTY FINANCING INITIATIVES FOR PUBLIC BODIES

Public initiatives:

The market development in the EPC/TPF field started with the first support programme – the ECIP Programme ("Energie-Contracting-Impuls Programm") in 1998. Upper Austria was the first region in Austria to implement a subsidy scheme for EPC. The aim of the programme was to establish a positive framework for Third Party Financing projects. The ECIP programme supported the energy performance contracting in public buildings.

After a successful first phase, the programme was enlarged to broaden the market development and the new "Energy Contracting Programme ECP" was introduced in January 2002.


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This programme does not only support energy efficiency projects but also investment in renewable energy technologies and the initial focus on the public sector has been extended to businesses. The programme offers financial support (maximum 100,000 €), depending on the type of project, minimum investment costs of 40,000 € are required.

Besides the financial incentive, the programme offers also a number of advice and information activities. The combination of financial incentive with an information element (advice from experts) is one of the key factors for achieving successful implemented projects and for establishing a broad ECP market in the region. The ECP/TPF programme was developed and is implemented in co-operation with the regional administration.

Private initiatives: The Upper Austrian ECP/TPF programme started in 1998 with targeting at municipalities – the public sector – only and was only in 2002 extended to companies – the private sector. The main market development therefore so far took place in the public sector. In addition companies are very often don't want to enter a for example 10 years contract with an ESCO. However, some good best practice examples have been completed recently and the prospects for further projects (energy performance contracting projects and especially biomass projects financed by TPF) in the private sector are very good.


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3.3.2 Country: Germany

OVERVIEW

The historical situation in Germany An inventory of obligations developed during the 1992 United Nations Conference on the Environment and Development aimed at preventing disturbance of the world's climatic system. The convention obliges the industrial nations (among others) to reduce their emissions of greenhouse gases to 1990 levels by the year 2000. Germany was able to reduce its CO2 emissions by 11% between 1990 and 1994. In order to reach the goal Germany has set herself, a 25% reduction in CO2 emissions (relative to 1990) by the year 2005, further energy conservation measures will be necessary. In the last 5 years, energy consumption was made more expensive, through the introduction of a CO2 or energy tax in order to promote less energy-intensive patterns of production and consumption.

The general situation for public bodies In Germany’s public buildings over 2 billion € energy costs are spent each year. 70% of these costs are occurring in municipalities. Fiscal crisis has led to increasing problems with inefficient, old technical facilities in the municipalities. Increasing energy prices are making the situation even worse.

The general situation for the energy service providers Since the 1990, the energy service market has made good progress .In the year 2004 the “association for energy delivery” stated for their members an annual volume of sales of about 900 Mio. €. Energy supply contracting, which means mostly the supply with heating energy, takes a 80%, EPC a 20% share of the contracting market of this association.

The general needs for an improved energy services market One of the main impulses for the energy service market is the fiscal crisis of public bodies which led to the need for restructuring the buildings administration towards outsourcing of tasks such as refurbishment and operation of heating units. Another important framework condition for the improvements is the development of standard procedures and tools, which has been pushed by energy agencies and comparable institutions. Still enough hurdles exist especially in public buildings: the lack of own experience and the still existing awareness from outsourcing projects especially in municipal administrations still requires strong efforts. May be the most important item is the dissemination of “good-practise examples”, which encourage still observant public authorities to do their “pilot-project”. Another specific hindrance of public bodies is the budgetary legal conditions. The division of the budget into two parts, one administrative and a wealth part, which are separately managed, is especially a hurdle for energy supply contracting.


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Specificity of public bodies The prerequisites of public bodies are: • The budgetary legal conditions. The division of the budget into two parts, one

administrative and a wealth part, which are separately managed, is especially a hurdle for energy supply contracting. Another main problem is the financial crisis, which is influencing the opportunities of public bodies. This problem is tightened by rising energy costs.

• Public administration has no direct incentive for optimisation of their equipment. Due to the budgetary legal conditions, savings earned on the administrative part of the budget can not automatically be transformed on the wealth part. A handful of administrations already have realized the problem and generated “in-house- contracting”- projects, were this hurdle was taken away for a limited of projects.

• The budget crisis has led to a reduction of the personal capacity of public administrations in the last years. Own staffs were replaced by external services, especially in engineering and design services. In many cases, smaller and medium municipalities don’t have own engineering competence at all, which would at least be needed for management of technical proceedings.

• Larger municipalities have often reduced their own technical staff. A problem is the fragmented organisation regarding ownership, O&M responsibility and the one paying the energy bills. A good organized “facility and energy management” is hard to find, especially in medium and small municipalities. The fragmentation of the organisation is responsible for friction losses at each interface.

ENERGY PERFORMANCE CONTRACTING, PROFIT SHARING, O&M INCENTIVES

Public accountancy: So far, no further regulations have been brought on the way to force public authorities to change their proceedings in the budget policies. Already the legal framework enables public bodies to manage their budgets economically, comparable to commercial terms, but it is not obligate. Still the majority does not take notice from that. The two-divided budget, as it is in mainly practiced, does not foresee any write- offs. That leads to the situation, that energy services, which normally include write- offs in their calculation are economically not comparable with a cost calculation not based on “full-cost”. VAT has to be paid by the end-consumer, which is the public body. This is does not lead to disadvantages for energy service project.

Public procurement: The Public procurement of energy services, EPC and O&M services is clearly stated: the VOL (Verdingungsordnung für Leistungen/purchasing regulations for services). This regulation states the definition of services, the purchasing proceeding in relationship to the amount of the purchased services in the contract period. If the amount exceeds 200 T€/contract period, EU- wide tendering is obligate Less than 200 T€, the regulations foresee Germany- wide tendering. Experience shows, that most of the


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energy services (supply and EPC) obviously have contract periods with 10- 20 years, so that in most cases, EU-wide tendering is compulsory. VOL specifies the proceeding for EU-wide tendering in several steps and also specifies a timetable with time periods between each step (§18a VOL/A):

• Basically, energy service projects can be purchased based on functional specifications (§3a VOL/A). This would mean in supply contracting projects, the basic information should be the quantity of energy to be delivered, may be a standardized contract and the major technical equipment specifications. In EPC projects, it has become common only to specify the objects, the contract and the energy and cost baseline. It’s the decision of the public bodies to give further specifications on the required services (§9 VOL/A)

• If done so, VOL foresees a negotiation proceeding, which enables the municipality to negotiate the offers with the suppliers.

• The announcement is sent to the Official Journal of the European Communities. The announcement may be for a prequalification assessment or directly for the offers. Looking at the cost- intensive proceeding for the ESCOs, the announcement should be for the prequalification first (non public proceeding after prequalification assessment). The time period until the prequalification assessment is at least 37 days.

• The criteria of the assessment are mostly specified in VOL: description of reference projects, verification of validity, integrity, paid taxes and social insurances. They have to be documented in the announcement. The result of the prequalification assessment is viable ESCOs, which are called to make a bid (§7 VOL/A). The time period for the offers is at least 40 days.

• Besides the contents mentioned above, the tendering records sent to the ESCOs have to include an evaluation pattern, where the criteria of the evaluation are explained.

• During the preparation time, the municipalities are responsible for answering any related questions by the ESCOs. At this stage, the ESCOs had to inspect the objects to produce a rough analysis. In EPC-projects, the technical solution has to be specified, the saving guarantee and the contractual period have to be specified. In energy supply projects, the energy prices and the technical solution have to be specified.

• After the first evaluation, at least the best three are invited to negotiate their offers. EPC projects foresee the size of energy cost savings which is evaluated, the tenderer with the highest energy cost savings receives the highest rating. The quality of the energy saving measures is evaluated by the following patterns: a) comprehensive approach of all the measures, b) detailed description of the measures and their interfaces, c) coordination of measures with respective object d) measures for user motivation. Energy supply projects are evaluated by the annual rates resulting from the energy price and energy consumption as well as the quality of the technical solution.

• The best offer after application of the criteria above is finally awarded. 2 weeks before the underwriting of the contract, all the companies that participated in the tendering procedure were notified of the winner.

Public organisation: In the mid 90ies, public authorities association (e.g. Association of Baden- Wuerttembergs municipalities) stated outsourcing of operative and design services as a main future target for


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municipalities. This statement has no legislative character, but has already been brought on the way in larger municipal administrations. Outsourcing projects mostly are concerned with engineering services in public buildings. Other functions, such as budget management have not been touched yet. The hurdle that seems to be the highest for dissemination of energy service projects is the scepticism of the municipalities:

• External companies might operate the facilities better than it was done before (by the municipalities). This often turns out to be true, it is one of the reasons to implement energy services.

• This implicates the fear of loosing competence or the job, because third party does better. KEAs own experience with energy service projects show, that the engineering staff is still needed for project- controlling functions, and that a remarkable reduction of personal in this function is not possible. Operational functions may be outsourced, which means, that in very large heating units, the contractor is engaging the existing staff. In smaller units, the facilities are often run by the housekeeper. The outsourcing of an important part of this category of facilities, e.g. the heating unit, would not implicate, that the housekeeper will be outsourced too, or lose his job.

• The fear that the energy service company earns money with their services, which could have been spared in own performed projects. The first part of the argument is definitely true, the second part definitely wrong. Energy service projects are based on calculations which implicate e.g. fixed investment amount and a minimum of energy efficiency ratio. In comparison to the municipal staff, the contractor has to earn money and does this by keeping up the efficiency ratio and investment amount stated in his calculation.

Grouped procurement for energy and/or EPC contracts: The costs for the public procurement proceedings (transaction costs) are high. This led to the idea, especially in smaller municipalities, to enhance EPC with “grouped procurement”. This concerns mostly multi municipal of buildings to create benefits of scale and cut the transaction cost for energy services. After the liberalisation of the electricity market in Germany after 1999, the municipalities were obligate to tender electricity service for their buildings. Except those, which have subsidiary utilities. In the last years, municipal associations started with group procurement for electricity. The transaction costs of this procurement could be remarkable (30%) decreased in comparison to single procurement proceedings. In the energy service market, the grouped procurement does not play an appreciable role; the amount of municipalities using this tool is very few. Referring to KEA’s information, in the moment only one EPC is brought on the way in grouped procurement. In discussions can be heard, that the municipalities are afraid of loosing control over the proceeding, and fear involuntary cross subsidies with the other part taking municipalities. This fear normally is not founded on facts: grouped procurement means, that each part taking municipality is managing one tender of the procurement. The evaluation is done for each tender separately, and the best offer for each tender will be awarded.

Third Party Financing (Often partially included in EPC contracts) and Leasing Third party financing and leasing has not gained an important role in energy service related functions in municipalities in Germany. This is due to the circumstance, that public bodies are, though their budget crises, good rated debtors, with low interest rates. For energy service providers it is very difficult to underbid these interest rates.


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CURRENT NATIONAL EPC OR THIRD PARTY FINANCING INITIATIVES FOR PUBLIC BODIES

Public initiatives: Germany’s national energy agency, DENA, has started a campaign for EPC in 2005 by disseminating brochures and initiating local information activities. In 2000, the environmental department of Hessen, has developed a first guideline for EPC in Germany. In this guideline viable standardized contract and tendering records were generated. In 2003, the national government also placed a EPC guideline, which mostly refers to the Hessen guideline. On the local level, energy agencies promote EPC and energy services, by providing own guidelines or information services.

Private initiatives: Associations of energy supply contractors have been founded already some years ago, and are very active to promote their members services to public bodies and industries. One of the largest associations, Verband für Wärmelieferung (Ass. for Heating energy supply) continuously provides members, clients and other market player with information and specific material such as standardized supply contracts.


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3.3.3 Country: Spain OVERVIEW

The historical situation in Spain At State level, the Centre for Energy Studies was set up in 1974 in response to the oil crisis and the need to promote energy saving and energy efficiency. This was a State Administration directorate without financial autonomy whose principal function was to implement legislative actions, to promote renewable energy and to carry out studies of industrial sectors. In 1984, the centre was renamed as IDAE, the Centre for Energy Diversification and Saving, an independent body with technical autonomy and the function of carrying out energy audits and studies, rural electrification plans, preliminary audits and assessment for energy saving and diversification and managing funds to subsidise actions eligible for incentives. In Catalonia, in 1991, once powers to promote energy efficiency had been transferred from the State to the autonomous communities, ICAEN, the Institut Català d’Energia (Catalan Energy Institute), was established. ICAEN’s mission includes, principally, promoting energy efficiency and the introduction of renewable energy sources and investing in projects to develop more efficient technologies. Both ICAEN in Catalonia and IDAE at State level, then, are responsible for launching energy awareness and energy saving campaigns, ranging from free audits for industrial companies and service buildings, advertising campaigns, the establishment of subsidies and financial participation in projects involving energy saving or the promotion of renewable energy. To date, ICAEN has carried out more than 1,500 energy audits and thermographic inspections at Catalan industrial enterprises, and has a share in more than 60 cogeneration and wind park enterprises, in which it invests 10% of installation costs through public corporations in order to promote the introduction of CHP and wind power in Catalonia. To manage this investment in projects both private and public, ICAEN established three companies, EFIENSA, SAENSA and EISSA, in which other public bodies also hold shares. EISSA is currently engaged in installing HVAC plants in medical centres and hospitals, managing this plant and selling comfort to buildings. EISSA is also responsible for acquiring the most efficient plant in terms of saving energy and reducing costs. Some Spanish autonomous communities provide subsidies for investment in energy efficiency and renewable energy. This year, as regards public buildings particularly, IDAE has increased its investment in projects involving public administration buildings: energy efficiency and saving in Spanish prisons and energy efficiency and cost reduction at La Moncloa complex. Apart from these public sphere activities, energy service companies (ESCOs), providing services for private enterprise, mainly industrial, are just beginning to appear in Spain.

The general situation for public bodies In Spain, energy efficiency and rational use of energy measures are implemented in piecemeal fashion, as no regulations exist at State level to govern these, and the lines followed in the communities to which powers have been devolved depend on the political will at the time.


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Spain is, however, working on this question at different levels:

• At State level, the E4 Strategy for Energy Efficiency in Buildings has been presented, and the Technical Building Code will be approved in 2005.

• Only a few autonomous communities, such as the Basque Country and Catalonia, have established regulations governing energy efficiency certificates, whilst work has been going on for some time in Catalonia on an eco-building decree. Moreover, as regards lines of action involving buildings and the rational use of energy, the Autonomous Government of the Balearic Islands has approved a programme which will apply for public buildings.

• Some local authorities, such as Saragossa City Council, have established energy efficiency ordinances focussing, in the main, on the introduction of renewable energy sources.

Moreover, on the question of public buildings and public administration services, it is important to take into consideration the different types of building according to the body in charge, as this is the body that will play an active role in making the investment, monitoring it and ensuring its possible replicability. The administrative levels and the buildings and services they are responsible for are as follows:

• Local administration: public lighting, traffic lights, infant and primary schools, water pumping, administration office buildings such as town halls, departments, sports centres, markets, libraries, etc.

• Autonomous community administration: secondary schools and universities, clinics and hospitals, public housing, prisons, ports and, in the future, airports and railway stations.

• State administration: ministerial buildings, infrastructure and, until devolved to the autonomous community administration: airports and railway stations.

Although more and more interesting and replicable projects are being implemented, the fact is that little has been done to promote monitoring of building behaviour, which would enable a more standard regulatory framework to be provided. Moreover, a series of barriers or inherent problems have been detected, and work should focus particularly on turning these into opportunities Regarding the ESCOs, currently public administration does not have any experience in contracting energy services. Till very recently this possibility was completely unknown. Only few companies such as EISSA offered to Public Administration energy services similar to those carried out by ESCO, although not always corresponding to the highest efficiency standards. As a result of the proposal of the Efficiency Directive com2003_0739es01, the sensation of necessity to contract companies which offer energy services to public administration has increased, so that recently there have appeared some companies which offer this kind of services to the Administrations. Additionally, public tenders for the acquisition of energy in the free market (in accordance with the Directives 2003/54/CE y 2003/55/CE of liberalization of energy markets) start to introduce the demand of the high quality services within energy efficiency from commercial companies (providers).

The general situation for the energy service providers Study of the situation in Spain shows that there is no energy service market in the country at present, with regard neither to demand nor to supply. Moreover, there exist a series of


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problems and barriers delaying the establishment of such a market. These can be summarised as:

• Lack of information, know-how and political decision

• Lack of standard market conditions

However, certain experiences have been identified in Catalonia and Spain that may be seen as projects aimed at developing the concept of energy services. These are isolated cases that cover only part of the potential service, but which enable a certain basic understanding to be acquired (i.e., HVAC in the public hospital sector in Catalonia through EISSA, district heating and/or cooling systems through public and private development, etc. As a result, we can conclude that, though energy services are a powerful mechanism for energy efficiency, organising and standardising, and which may produce interesting results:

• The Spanish and Catalan administrative authorities still have much to do, • Energy saving and management is important (both public and private), • A market exists in business and industry • Technical and economic barriers can be overcome.

The concept of energy service company is open to misinterpretation and, in some cases, different companies offer a range of energy management or integral services, calling themselves energy service companies when, in fact, they do not provide the services defined here. Nonetheless, it must be said that an energy service company does not necessarily have to provide all the services it offers: some services can be provided through subcontracting

or strategic alliances. In any case, however, the service company itself will be responsible to the client for ensuring guarantees and quality of service. Here, there are, in principle, three profiles of companies that will take different directions according to core business activity to offer energy services as an integral service:

• Pure energy company: supplying power or heating. • Maintenance company: specialising in building, facility or plant maintenance

operations. • Technological, industrial and engineering companies: these have experience and

know-how, some financing energy projects and seeking new business areas. The Spanish government strategy is to encourage all possible supply companies to take part in establish a diversified, standard market, promoting alliances and UTEs in order to provide a quality, professional integral service.

The general needs for an improved energy services market The principal obstacles that exist in Spain and in Catalonia to the development of energy services are cultural, political and technical in type, as well as concerning aspects of operation and functioning.


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The following barriers are particularly important:

Socio-cultural barriers

Novelty and culture. Energy services are a new instrument, both in terms of concept and procedure. Moreover, our culture is not sufficiently mature in terms of energy and energy efficiency awareness. Lack of political will at the different administrative levels, linked to the lack of energy bodies forming part of local administrations to promote initiatives. Rigidity of local authority budget provisions, as budgets are structured into items that must be kept separate, making it difficult for investment in efficiency to help decrease maintenance costs as items are differentiated (running costs).

Technical barriers

The situation of the building pool and its functioning. Departments of the public administration are generally distributed throughout the territory and not in one single building, and this makes investment or actions to improve energy efficiency more difficult to make. The conditions under which a building is used, whether rented or owned, may serve to block certain initiatives. If a building is rented, especially, the engagement of those responsible for deciding whether or not to carry out a particular action may be very limited. Nonetheless, an Energy Performance Contracting (EPC) agreement may give equally positive results. Lack of knowledge on the part of those involved: politicians, technical personnel, companies, developers, maintenance companies, suppliers...

Market barriers

Lack of players on the market: matching supply and demand methodically and in the most suitable conditions. No energy service companies exist that respond to the definition of the ESCO. However, professionals and companies with similar capacities do exist. For example, the European database on energy service companies identifies five ESCOs in Spain. However, these are not really ESCOs according to the above definition. These companies possess the technology and know-how but have not adopted the procedures or ways of operating. Most of these problems could be resolved by establishing a Regulatory Framework for Energy Services, stipulating the rules of the game for both sides (supply and demand).


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Specificity of public bodies When analysing the prerequisites for public bodies’ usage of different energy services and financial instruments it is important to take in account the specificity of the public bodies in terms of:

• The property of the public building: when public authorities are renting or leasing: the premises taken in consideration are no the same as owning them.

• The priority of energy efficiency in public agenda’s: Public bodies, if there is no legislation, are influenced or affected by politicians. The energy efficiency and rational use of energy is not always de main issue to be considered.

• The investment capacity of the public bodies is limited and the process to be accepted is normally long

• The financial mechanism: public bodies normally have less developed financial skills and experiences compared to private enterprises and also are more limited concerning the legal possibilities.

• Dispersion of the buildings which belong to a department: complicates the introduction of efficiency measures. The fact that sometimes offices are not in the same building.

• The diversification of the public bodies in terms internal decision makers: is often to find a fragmented organization regarding ownership, O&M responsibility and the one paying the energy bills.

• The process and methodology to introduce the energy aspects: the lack of legal framework the efficiency energy measures are mostly introduced at the end of the building process

• When it is a new building: it is easier to introduce energy measures in terms and the cost is also lower.

• When it is an existing building: the cost is so high that enables the introduction of all or most of the initiatives identified.

EPC, Energy performance contracting Public-private partnerships can be roughly classified into three categories: The public authority and a private organisation form a private/mixed company. Both participate in that company. The new company carries out the public services. The public authority signs a contract with a private organisation for a planned duration, who carries out the public tasks (such as, for example, construction and maintenance) with his own investments, but the responsibility for providing a public service to citizens still lies in the hands of the public authority. This is Performance Contracting (PC). The private organisation is granted a concession to provide a service and is allowed to charge the citizens using that service a fee. This is concession contracts. On the other hand, there are other aspects that have to do with the state regulation, organisation, etc that have to be explored. There is no experience at all in Spain but there are some initiatives that run under this objective.

Public accountancy:


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In Spain, the public administrations are governed at present by the revised text of the Law on Public Administration Contracts (Legislative Royal Decree 2/2000 of June 16) and by subsequent revisions of it, such as: SECTION IV Article 34 of Royal Decree Law 5/2005 of March 11, on Urgent Reforms to Promote Productivity and Improve Public Procurement. This framework establishes the criteria for purchasing any goods or services by the administration. As regards legislation regulating energy markets since the start of the liberalisation process in 1997, promoted by the European Community, Spain has adopted a series of laws, regulations and standards that have greatly altered the situation as regards managing buying and selling energy. The starting point in Spain was laid down by Law 6/2000 of June 23, on Urgent Measures to Intensify Competition in Goods and Services Markets. Later, Royal Decree 1955/2000 of December 1, regulating electrical energy transmission, distribution, marketing and supply activities and the procedure for authorising power facilities, laid down management parameters and established the requirements companies, suppliers, marketing companies and consumers should comply with in buying and selling electrical energy. Since 1 January 2003, processes of liberalisation in both the electricity and natural gas market and as regards vehicle fuel have entered fully into effect, to the extent where consumers can now purchase energy from the marketing company of their choice. This opens up the possibility of marketing companies complementing the work of buying and selling energy by offering their customers value added in the form of advisory services. In this way, they would begin to fulfil the role that ESCOs are called on to play. In any case, up to day so far there has not been published any decree or law which would establish a method or rules of contracting energy services between ESCO and users. In the framework of the project SENA of the European Commission, ICAEN is working on the design of a juridical framework which regulates the contract settings of ESCO. Until there is no established regulation framework, the only experience which can serve as a base for the legal relationship between ESCO and users is the particular legal framework which has been established between the consumer companies and energy suppliers or companies responsible for maintenance, which could offer in a desultory way some energy service (as the case of EISSA).

Public procurement: Given the way the administration operates, the decisions taken by such organisations tend to be very conservative. For this reason, when contracts are made, there is a tendency to gain less whilst reducing the risk of losing a lot to the minimum. In consequence, the main regulations seek to ensure high security provisions for budgets. For this reason, for example, when a call for tenders is announced for the purchase of electricity on the free market where the price varies from hour to hour (meaning that there are, over a twelve-month period, 8,760 different electricity prices corresponding to each hour in the year) marketing companies are asked to offer a single price for all electricity consumed, and that the marketing company should manage price variations, even though in this way the Administration runs the risk of ending up paying more for this power than if other methods of purchasing energy were adopted.


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This system enables the Administration to establish a budget that is relatively firm, conditioned only by the fact that it is difficult to predict consumption in one year’s time but, in any case always subject to a fixed price. This philosophy also holds with the few contracts signed to date with ESCOs.

Public organisation: At present, the public administration is perhaps the biggest subcontracting party. Whilst industry always has its facility maintenance and management personnel, only very rarely does the public administration have its own building or facility manager. To put it another way, there are very few public workers in charge of managing and maintaining public administration buildings. A company is often subcontracted to manage services: change fluorescent lamps, manage HVAC machines, repair windows, partitions, blinds, electricity switchboards, etc. Paradoxically, however, this maintenance service outsourcing does not involve hiring an ESCO, either because they are not so well known, or because there are none or because, simply, it has just never been done before. It is a well known fact that it is difficult to change the way the public administration works, that, incomprehensibly, this requires enormous efforts. For this reason, services, when not hired, belong to the public administration but, in no case, to the company that manages them. It is most probable that knowledge of these different options for contracting services that are beginning, very slowly, to be used by private enterprise, will reach the world of public management. At the moment though, it does not seem likely that this will happen overnight.

Grouped procurement for energy and/or EPC contracts: Actually, there is not a procurement for energy services, Spain is in a previous phase, developing the rules and regulations that have to be implemented for different types of buildings and uses.

Profit sharing (Project and/or O&M incentives) As regards financing energy projects, particularly energy services, there are two forms, each entailing different risks and liabilities: Guaranteed savings: the energy service company assumes both financial and technical risks. Shared savings: the customer is responsible for investment and financial risk, whilst the company assumes the technical risk. Although both forms exist side by side, we feel that for energy services, in the case of the public administration, it is more advisable to adopt the guaranteed savings system rather than one based on profit sharing. This is because, if the company assumes both technical and economic risks, it becomes possible to win the user’s trust over more quickly. In the case of guaranteed savings, the contract period is longer, but the public administration delegates problems. Furthermore, this type of financial scheme permits greater transparency, demonstrating:


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• the ESCO’s faith in the quality of its services and, • guarantee of contractual payment (usually monthly) by the public

administration. We feel that, in the case of a service so new to our country, such as those provided by ESCOs, the formula based on guarantees is particularly attractive in enabling both parties to achieve trust in the market.

Third Party Financing (often partially included in EPC contracts) Third-party financing is a financial formula firmly established in the private sector, principally, in Spain. In energy projects, it has been used, basically, in renewable energy initiatives (wind farms, photovoltaic facilities, etc) and very little in the field of buildings. There are aspects of ownership questions regarding this form of financing that are not quite to the liking of public bodies. The main problem of the third party financing (TPF) projects is that till recently companies offering this kind of service did not exist. Other problem for applying TPF in public installations is that in case of forming a company which would manage, finance and execute the energy efficiency politics, this usually has very high life duration period, superior to legislation period which, in fact, would make difficult for the municipal authorities to approve this kind of projects. From another side, besides all the official difficulties in order to establish this kind of project, responsible public authorities are used to own their installations so that they often resign to finance them through the third party.

Leasing Fundamentally speaking, this form affects ownership of the plant in which the ESCO has invested in order to provide the service. Leasing is a habitually used practice, particularly for large, industrial projects. The previous two formulae can exist side by side.


Public initiatives: Below are some of the most outstanding projects in the field of EPC and third-party financing:

• District heating with biomass in Molins de Rei: creation of a mixed society to operate the energy project. EPC

• Installation of air conditioning systems in Catalan hospitals by EISSA. EPC • Wind parks: third party finance of wind projects • Solar installations in schools by third party finance • Solar guaranties results in hotels • New public building promotions considering energy services

Private initiatives:


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Few private initiatives are launched without aid, support or promotion by a public organisation. In Catalonia, investment in most projects is partially or wholly public. Companies have recently started to emerge that are engaged in CHP or HVAC plant installation, but their activities are more centred on financing projects than on providing construction and operating services (or, therefore, with seeking energy saving measures). The engineering companies that design plants are often those, also, that offer customers this financing service.


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3.3.4 Country: France OVERVIEW

The historical situation in France The principles of both the national energy policy and sustainable development are linked to accommodate two requirements: the satisfaction of energy needs related to economic and social development and environmental protection and the preservation of natural resources. They therefore imply the implementation of active energy conservation policies and the development of renewable energies. Several documents clarify the implementation of this policy: the guidelines of energy group services, the national energy efficiency improvement plan, the implementation of which is ensured by ADEME (the Environment and Energy Control Agency), and the national plan to combat climate change drawn up by MIES (the Greenhouse Effect Inter-ministry Mission). An important debate centred on energy was held from January until May 2003, which is to result in a framework law in 2005. This law will include the implementation of energy efficiency certificates (mainly due by energy providers). The transposition of the European directive on the energy performance of buildings will be done in 2006. The energy performance certificates for buildings should be mandatory in 2006 (for sold ones) or 2007 (for rented ones).

The general situation for public bodies It is traditionally assessed that municipalities have several roles in the field of energy: consumer, but also responsible for the distribution of electricity, natural gas and district heating, energy producer (renewable energy sources and CHP), information provider, urban planning. In the 70’s, the main point was financial savings after the oil crisis. Some important energy efficiency works had been done, and the first energy departments have been set in the local authorities, but did not always last, because of the decreasing prices of energy in the mid 80’s. Now the interest for energy is seen by the environmental impacts, especially the greenhouse gases, and is to be included in sustainable development projects, such as Local agendas 21. Anyway, there are still numerous local authorities that do no want or do not know how to implement a real energy policy. The use of energy services is not widely spread among public bodies, except for the use of operating and maintenance contracts.

The general situation for the energy service providers The energy service providers are associated in a federation (FG3E – federation of energy services companies for environment), of several professional unions, including one for the operation and maintenance of thermal installations (SNEC). The federation represents an annual turnover of 6 billion € for 500 companies, and the SNEC 60 companies which operates the thermal installations of 4 million of apartments and 167 Mm² of office buildings for an annual turnover of 2,7 billion €.


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It has recently developed a quality approach to offer the best service to the customers, called Valiance. It includes the search for progress when operating and maintaining installations, the preservation of the installations and a transparent information for the customer, with a personalised approach to take into account its needs. Some of the energy services companies are members of groups that also provide other services for local authorities (waste, water…), and so they have a long experience in working for them.

The general needs for an improved energy services market The main obstacles to the development of energy services are:

• juridical : the code for public tender has obliged to separate the investment and functioning costs for an equipment, and forbids the operating costs to contribute to the payment of the investment. This point has been included in the code in 2004, after some abuses that allowed only bigger companies to tender. A new frame for public-private partnership has been implemented in 2004 that should allow global contracts

• - procedures: local authorities are now reluctant to engage in long term procedures, that excludes longer return on investment times for energy contracts. They are also not willing to include financing schemes in other contracts, but prefer to get them separate.

• - financing of investment: local authorities are now less willing to borrow money for their investments, and prefer self-financing. Moreover, there is always a lack of means for the general investments, and energy investments are not seen as a priority.

• - market organisation: until the last years, there was a strong separation between energy providers (public and national ones) and energy services companies. The energy providers, because of their monopoly, where forbidden to provide energy services. This is changing with the opening of the markets, but local authorities hesitate strongly to go on the open markets.

• - political: energy efficiency is not seen by politicians as attractive (this may be changing with the rise of environmental interest), as it is not visible (and not at all on the short term)


Public accountancy: In France, the Constitution recognises the freedom of the local authorities to administrate themselves, that implies a financial autonomy. The main specificities of the accountancy of local authorities are the following:

• the General Accountancy Plan is applied, with some small adaptations (for write off, it does not concern buildings and roads). There is a clear separation between investments and running costs. The write off of heating systems duration is between 10 and 20 years.

• an annual budget is voted each year, that should equilibrate expenses and incomes, including state subsidies.

• the expenses are controlled by a civil servant of the ministry of finances.

About VAT:


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• some specific expenses are not included in the field of VAT, mainly for public services where there is no concurrence (i.e. administrative tasks, waste management, libraries, swimming pools, …), that means that it is not possible to recuperate VAT and that VAT is not due by the user.

• local authorities can choose to be in the field of VAT for commercial services (i.e. that requires a payment by the user, such as waste management, water distribution …), that will allow them to recuperate VAT on costs.

• VAT on investments can be refunded via a special state fund.

• all the expenses linked to energy consumption are submitted to VAT, that is not refundable if the service is not included in the field of VAT (general case)

Public procurement: The main principles for public procurement are the following:

• - free access to public tender • - equal treatment of candidates • - control of the use of public expenses, through formalised procedures for

tender

The main rules are included in a code for public procurement that has been rewritten in 2001 and 2004. A decree on public-private partnership has been issued in 2004. Mainly dedicated to state investments in buildings, it can be used also by local authorities. The general rules for the public procurement for contracts concerning services and goods are the following:

Amount

(for the whole duration of the contract, excluding VAT)

Procedure Comments

< 4 000 € None

4 000 – 90 000 € Free procedure Chosen by the public body

90 000 – 230 000 € Adapted procedure Publication of the call for tender. Free negotiation

> 230 000 € Call for tender General European rules

Possibility of “competitive dialog”

Pre-qualification possible

Of course, it is always possible to implement a stricter procedure. For the State, the level of 230 000 € is changed 150 000 €

Public organisation: The local authorities have technical and administrative services, some of them obligatory (for example for official acts). The local authorities are free to choose either to subcontract or not the facultative services. The employees of the local authorities are civil servants.


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Within the technical services, the energy management is not frequently dedicated to a specific service, but generally included in a service for buildings (building, maintenance and running). This leads to difficulties to implement an efficient energy policy.

Grouped procurement Grouped procurement is allowed to the condition to respect the general principles of public procurement. It is mainly used to buy goods, when it would be too complicated to organise a specific tender (either smaller goods or for price advantages), but less for services, that require a specific definition of the needs. There had been grouped procurement for oil several years ago, but with the conversion of boilers to natural gas, they were not working any more. With the opening of markets there is one experience for grouped procurement of electricity, but since tender is still not mandatory for local authorities, this procedure will not be implemented in the next years (moreover, the costs of electricity and gas on the regulated market are low and do not encourage local authorities to go on the liberalised market).

ENERGY PERFORMANCE CONTRACTING

Public accountancy: If an investment is paid by the public body through a reduction of running expenses (energy bill), it will not be possible to recover VAT through the special fund. With a 19.6 % rate, it means that return time on investments is 1.2 times longer. The advantage is that the costs will not appear in the investments part of the budget.

Public procurement: The rules for public procurement make it difficult the implementation of EPC, because the code for public tender (article 10) forbids the payment of an investment by the results of exploitation. The article 10 means that:

• The price for investment and the price for running must be clearly separated. Anyway, it is possible to implement an investment for reducing costs and guarantee it with a fixed price O&M contract, but the investment has to be paid first by the public body

• It is not possible to include financing in the same tender but it can be done with another tender. The rules of public-private partnership (PPP), authorised since 2004, should allow the implementation of EPC including the financing. PPP is not part of the code for public tender, and it can be implemented in the case of “urgency or particular complexity”.

Public organisation: The lack of an energy department in technical services can make difficult the real knowing on energy material and expenses, so the study to implement EPC will be difficult (it could be turned out by a specific study on the energy consumption of the local authority called global energy audit).

Grouped procurement for energy and/or EPC contracts: It seems very difficult to get several public bodies to group for EPC contracts, because buildings management is considered as an important prerogative of local authorities.


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Profit sharing (Project and/or O&M incentives)

Public accountancy: The costs of a profit sharing contract with O&M incentives are submitted to VAT, and are paid on the functioning part of the budget.

Public procurement: A call for tender (the procedure depending on the total amount of the contract) is necessary. These contracts include 3 parts: Energy (called P1), operation and maintenance (P2), important repairs and replacement (called P3). Only P2 is mandatory in such contracts, but very frequently when there is profit sharing, the 3 parts are included in the contract. There is a contract model published by the ministry of finances, indicating precisely what can be included, how are done the payments and the calculation of profit sharing and the duration (CCTG 2008), but it is not mandatory. This model considers 5 kind of contracts, where it is possible to include or not P3, and to include or not profit sharing. Prices can always be revised according to economic variations: - Fixed price (MF): the price is depends not of the real consumption, and includes P1

• Climatic revision (MT): the price is revised according to climatic variations and includes P1

• Heating metering (MC): the price is revised according the quantity of heat provided, and includes P1

• Fuel metering (CP): the price is revised according the quantity of fuel used, and includes P1

• Only P2 (PF)

Public organisation: The O&M contracts are very frequently used by local authorities that do not want to manage directly this service. But profit sharing in these contracts are less common, because they request a specific survey to check the results, and also because there is a lack of metering systems.

Grouped procurement for energy and/or EPC contracts: Grouped procurement is quite never used for this kind of contracts. In some rare cases, it is a union of local authorities that tenders for the contracts.

Third Party Financing (Often partially included in EPC contracts)

Public accountancy: There is a possibility of recuperate VAT through the special fund, if it is considered that it is the local authority that makes the investment. That means than the installations are considered to be the property of the local authority since the beginning, even if it is paid later.

Public procurement: The rules for public procurement of borrowing contracts was not submitted to the general rules for tender until a recent decision of the high court for administrative law (the Conseil


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d’Etat) in February claimed it was not conform to European directives. It is still to be decided whether a new writing will be implemented or not, but until any new change, financing is submitted to the general rules for tender. It is possible to tender for the financing of an EPC contract after the results are known. The financing contract could be implemented considering the results of the EPC contract (or otherwise if it is preferred by the public body). Private bodies can of course implement EPC contracts including the financing part directly.

Public organisation: The implementation of third part financing requires at the same time a specific technical energy department within the technical services and a link with financial and procurement department to implement correctly the financing scheme.

Grouped procurement for energy and/or EPC contracts: It seems very difficult to get several public bodies to group for third party financing contracts, because financing is considered as an important prerogative of local authorities.

Leasing

Public accountancy: Leasing is authorised, but it leads to a different VAT approach: the local authority can recuperate the VAT only on the buying option amount (that is usually very low), not on all the costs. If the local authority invests directly, it can recuperate the VAT on the total amount. The interest of leasing lies in the possibility to determine the level of payments freely (either constant terms, or progressive, or regressive,

Public procurement: Leasing is submitted to the general rules for tender.

Public organisation: Leasing is generally used for:

- investments in technological devices, especially those having a short life time

- real estate investments, if there is a need to isolate the costs of an operation, if it is industrial or commercial

- investments for services where a payment is due by the user (public transport …). In this case the service can be submitted to VAT that would allow to recoverate it.

Grouped procurement for energy and/or EPC contracts: It seems difficult to get local authorities to group to tender for leasing, because financing is a sensitive subject.


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Public initiatives: The national energy agency developed some financial funds for financing energy efficiency (FIDEME and FOGIME), but it is mainly dedicated to small end medium companies. In the field of the Picolight project, it also organises an information day on financing schemes for energy efficiency for local authorities. AMORCE, the association of local authorities for waste and district heating also organises a seminar for financing energy efficiency, but it is more dedicated to subsidies than to energy efficiency services.

Private initiatives: Energy services companies, through their union (FG3E), promote the development of energy services, and have developed a specific offer to link their services to efficiency and quality of results. This offer is more linked to operating and maintenance contracts, but does not take into account the specificities of local authorities.


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3.3.5 Country: Finland OVERVIEW

The historical situation in Finland Esco-type contracts have been made in Finland for more than ten years. Despite the long period the number of contracts is not very large. Motiva, national energy efficiency promoting organisation keeps listing of known Esco contracts. The last updating of the list is November 2004. On the list there are 35 contracts since 1995. Six energy service organisations have made contracts, YIT, ARE, Enespa, Foster Wheeler and Inesco. Public body is partner for 17 contracts and in 18 cases investment has been made for private organisation, mainly in industry. YIT has made many contracts with public bodies, the target has been often modernisation of ventilation system, heat recovery units and building automation modernisations. Enespa has made also mainly public cases where dominating client group has been modernisation of icehockey halls, specially ice management and heat recovery from chillers. Inesco has made 12 contracts, all with industry. Contracts vary from large heat recovery investments in process industry to turbine modernisation in a power plant. The other ESCO companies have made only few cases.

The general situation for public bodies The governmental buildings are mainly owned by Senaatti Kiinteistöt. The total number of buildings is about 11 000. By volume the largest category is university buildings 38 %, second largest is office buildings 32 % and third category is special buildings 30 %. The special buildings include hospitals, defence forces buildings etc. The Senaatti Kiinteistöt buildings are managed by professionals and their energy consumption is continuously recorded and benchmarking is carried out within similar buildings categories. Energy audit has been carried out in virtually all buildings. Senaatti Kiinteistöt is partner in national energy saving contract. The energy audits revealed energy savings potential in the buildings, all actions showing payback time of less than 3 years has been done. The other actions will be taken when other improvements in the buildings are made. The specific energy consumption in the Central Finlad region for Senaatti Kiinteistöt buildings is 39 kWh/a/m3 for heat and 20 kWh/a/m3 for electricity. The target is to reduce the energy consumption by 10 % before 2006 and 15 % by 2010. The target seems to be challenging and even unachievable. There are several reasons why the savings targets are so challenging. The usage of buildings is increasing, there are more activities in evenings and weekends which will increase the energy usage. There are also a lot of buildings built during 70’s and 80’s. When these buildings are renovated, indoor air quality is improved and cooling added, the total energy consumption may even increase despite of addition of heat recovery units for air conditioning and other energy savings actions. In municipal sector the situation is very much similar. Most facility management organisations and housing companies are partners in voluntary national energy savings contract. They have promised in the contract to carry out the energy audits in their facilities and to report the energy consumption annually and to decrease the specific energy consumption. This has increased the energy awareness and major part of such notified actions where payback time is 2 – 3 years has been done. There are still possibilities in the category of 2 – 6 years payback projects.


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The general situation for the energy service providers The active energy service providers are quite limited. On the MOTIVA list there are 35 contracts since 1995. Six energy service organisations have made contracts, YIT, ARE, Enespa, Foster Wheeler and Inesco. Public body is partner for 17 contracts. Some companies have recently shown interest in EPC but no new contracts have been published yet.

The general needs for an improved energy services market From the interview of ten major facility owners a conclusion can be drawn that governmental and municipal sector is quite well aware of the energy issues. They have access to funds to finance all actions with reasonable payback time. They have experience that all investments are not as profitable as expected, investment turned out to be more expensive than expected and other uncertainties. There is clear interest for Energy Performance Contracts. On the other hand only few suppliers have offered EPC services. Energy performance contracting without financing features will be a good possibility to increase the energy savings investments. Knowledge level must be increased among customers that they start to demand such services. Suppliers are not pushing guaranteed savings concept as long as they can manage with mechanical performance guarantee of supplied equipment. The financing institutions are actively offering their services as cheap sources for funds and this will lower the interest in the financing component of EPC.


Specificity of public bodies The governmental buildings are mainly owned and managed by Senaatti Kiinteistöt. The total number of buildings is about 11 000. By volume the largest category is university buildings 38 %, second largest is office buildings 32 % and third category is special buildings 30 %. The special buildings include hospitals, defence forces buildings etc. The Senaatti Kiinteistöt buildings are managed by professionals and their energy consumption is continuously recorded and bechmarking is carried out within similar buildings categories. Energy audit has been carried out in virtually all buildings. Senaatti Kiinteistöt is partner in national energy saving contract In municipal sector major part of buildings are organised into municipal facility management organisations (offices, schools, hospitals etc.) and municipal housing companies. In small municipalities the facility management may be under officials with many other duties as well and may not be in as good control as in midsize and bigger municipalities. Municipalities are generally partners in national energy savings contract and thus report the energy consumption regularly. Kuntaliitto, association of municipalities; collects the energy consumption data of municipal buildings and publishes the data. The municipalities can easily do benchmarking among building groups and notice if they should pay attention to energy issues in some building categories or individual buildings. The municipalities state that they will get funds for all reasonable investments. Of course it takes 1 – 2 years to go through the budgetary process if the need is not allocated in advance. The municipalities are risk free customers to banks and thus the margin for borrowed money is very shallow. The municipalities have also jointly owned special finance institution, Kuntarahoitus, financing municipalities and companies in close relation with municipality, loans to be guaranteed by municipality. These funds are for large investments or loans not


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allocated specifically to any projects. Kuntarahoitus is not willing to make very small loans for individual energy savings investments. Funds from Kuntarahoitus are market interest funds with very shallow margin. Government is supporting EPC by granting slightly higher grants for investments where EPC concept is used but this has not been enough to trigger any wider demand for contracts. Senaatti kiinteistöt as owner of the most of governmental buildings, municipal facility management organisations and housing companies generally feel that they are aware of their energy management situation and know pretty well what they are doing. Ownership of public buildings is centralised rather than fragmented. Different actors rent their premises from the property management organisations. The occupants will state their needs regarding temperature, ventilation, air conditioning etc. but the building management and investments are carried out by the property management body.


Public accountancy: The VAT deduction is done by the investor and rules are clear, no problems are reported. The common case has been that the EPC contractor has financed the investment in total or partly. The smaller operators have included the investment into their balance sheet. The bigger operators like YIT are publicly listed companies. They watch their performance indicators closely and one important indicator is the earnings per invested capital. This is the main reason YIT has made the ESCO investment off balance sheet. The present financial reporting system, IFRS will force the EPC investments to be shown on the service provider balance sheet and YIT is not willing to do so. In future projects Third Party Financing will be used. There will be separate contract for financing the project between municipality and finance company corporation and performance guarantee contract between ESCO and client. The financing contract may be lease contract, when the investment will be recorded on the finance company balance sheet. At the end of lease contract the client may by the investment from the lease company at the agreed price, typically 10 % of the investment. If the client is not willing to by the lease contract will be extended for one more year and the lease company will get is money and the client will get the ownership to the investment free of charge. If it is agreed in the beginning that at the end of the contract the price is zero, it will not be classified as lease contract but partial payment and the investment should be on the client’s balance sheet. In such case the investment will not be a collateral for finance company. All technical and performance risks are at ESCO. This will be applied to contracts under negotiation and all future contracts by YIT. Smaller companies may continue the EPC investments on balance sheet.


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Public procurement: The first contracts have been made without competition based on negotiations. This will not be able in future. In Finland the law does not state any minimum level where competition is necessary. EU wide regulation states when competition must be published in the official media and other terms to be followed, but in practise the towns are interpreting the law very tightly and competitive bidding is applied at all service or goods purchases above 1000 – 3000 euros. This means that all EPC contracts will fall within competition, small contracts may be by inviting 3 – 5 bidders to compete the target and large contracts will be according to public bidding process. The routine to arrange public bidding for EPC-contracts is not developed yet. Only few cases have been performed so far. Motiva is partner in project where the competition issues are addressed and in near future new information will be available. This is one hindering fact, if you invite 5 contractors and they may not be willing to do their own review of the target when the probability of winning a contract is low and proper competition is difficult to arrange. An arrangement where the audit of the target is made by independent consultant and bidders are requested to commit themselves to this audit, is used. Winner of the competition will pay the costs. New routines and experiences of the arrangement of public bidding are welcome.

Public organisation: The public property owners/managers do not see many benefits in EPC contracting. They are mainly large or mid size companies well capable of taking care of project management and financing. Especially they feel that it will be economically viable to do the investment themselves instead of using ESCO financing. The reasons affecting this attitude may be that there have been only few cases so far and some of the EPC service providers have tried to get contracts with very high margin. Property managers have also let the service providers to study the potential cases but often the service provider has decided not to offer due to too long payback time. This has created the feeling that EPC is for desperate cases only who are not able to carry out investments themselves. The attitude towards Energy Performance Contracting without financing component is very positive. EPC will bring the positive elements like risk free, well thought investment. Supplier can not promise too much because the performance is followed for long period and the total reward for the work is tied to the performance. The Energy Performance Contracting without financing element may have brighter future.

Grouped procurement for energy and/or EPC contracts: There are no restrictions towards grouped procurement. Some of the property managers are already themselves large potential buyers. There is already long tradition in grouped purchasing of electricity, fuels etc. However, procurement of EPC is regarded rather complicated compared to bulk items like fuel or electricity. No actual cases have been reported.

PROFIT SHARING (PROJECT AND/OR O&M INCENTIVES)

Public accountancy


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Profit sharing is used as part of EPC arrangement. Parallel to EPC investment contract an O & M contract is made. Typically the EPC contract is agreed on relative safe savings assumption and the savings exceeding the contracted amount is shared 50/50 (or 60/40) basis. In other cases profit sharing is not widely used.

Public procurement Profit sharing contracts will be awarded only by public bidding. Only few cases of profit sharing have been performed and there is uncertainty how the competition should be arranged. Good examples for simple but working procedures are needed. Profit sharing has interest among public property management organisations.

Public organisation Profit sharing provides the public organisation a low risk option for an investment. The supplier will be tied on the investment by O&M contract for few years and will have common interest to make sure that energy savings are achieved in practise.

Grouped procurement for Profit Sharing No examples of grouped procurement found for profit sharing arrangements.

Third Party Financing (Often partially included in EPC contracts) Third party financing is not yet widely used but it will be part of some new ESCO-contracts. The publicly listed companies have done the ESCO investments off balance sheet but according to present interpretation it is not possible under IFRS accounting routines. The company will show high earnings per invested capital and thus is not keen to take the investments into balance sheet. Due to this, an arrangement with financing company will be made. The arrangement will be some sort of lease contract. All technical and commercial risk of the project will be on service provider. Ordinary banks and municipal finance institution Kuntarahoitus were not keen on such arrangements.

Public accountancy Third party financing is not widely used for energy savings investments. Energy savings has been financed from own funds or by loans and in the few ESCO cases the service provider has financed the project. If the financing organisation will retain the ownership of the investment as collateral the project will be in the books of financing organisation, otherwise it will be in the books of the building owner. Public organisations like municipalities are considered as risk free customers and they get loans without collateral. Other public bodies like municipal housing companies utilise municipal guarantee and then they get funds on same terms as municipals. This arrangement reduces the interest to other forms of financing.

Public procurement Public procurement procedures will apply also for financing.

Public organisation Public organisations will get funds from finance institutions. Energy savings contracts can simplify the decision making process. All municipal guarantee and loan decisions will be handled in municipal council. Third party financing may be by technical committee because budget provisions are not needed. There is some scepticism towards new forms of financing, municipalities tends to trust that direct loans will be the most cost effective way to finance the investments.


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Grouped procurement for Third party Financing Not widely used.

Leasing Leasing is possible but not widely used method of financing. Leasing is used typically on such investments which are somehow independent from the building itself. Leasing is typical form of financing for vehicles, equipment etc. In few cases leasing is used to finance a complete building. If the components are heavily integrated into other systems, leasing is not valid alternative because it is difficult to use the leased equipment as collateral. The first leasing contracts are under negotiation in relation to EPC contracts.

Public accountancy Leasing is acceptable way of financing and used typically for financing vehicles and equipment.

Public procurement Public procurement applies for leasing as well. Lease contracts will be awarded after competitive bidding.

Public organisation Public organisations are used to get financing on attractive terms on loan basis. Sometimes it is feasible for accounting reasons to use lease financing if special financing arrangements are used. The costs of lease contract may be included in the project costs but the direct investment costs may not be eligible. Not common so far with EPC contracting.

Grouped procurement for Lease Financing Not widely used.


Public initiatives: The government owned energy savings promotion organisation MOTIVA has been spreading information regarding ESCO and related energy services. They have organised at least one seminar annually and give speeches in different seminars, prepare brochures and press releases time to time. They also keep official record of EPC contracts, ESCO companies and advice parties interested in EPC services. Government typically grant slightly higher investment grants for energy savings investments if EPC contracting is used in order to promote such activities.

Private initiatives: One service provider, YIT has been active in public sector. Others have shown interest recently but no new contracts have been reported. Associations of municipalities or potential service providers have not shown any major interest.


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3.3.6 Country: Italy OVERVIEW

The historical situation in Italy Until 1987, Italian energy policy seemed to be little inclined to look to the example and experience of other countries, and produced a somewhat centralised, rigid and constrained energy policy, largely prepared with the involvement of a national energy organisation dependent on the Central Government. Today, the picture is completely different. On the one hand, there is the international influence in the form of the objectives set by the European Union; on the other, the process of decentralisation in Italy has led to the participation of regional and local governments in energy policy. The conviction is growing that energy, as a strategic factor for the economic and social development of the country, requires recourse to market dynamics and free initiative, superseding the older concept of the need to regulate the topic exclusively through a command and control regulatory system. More recently, in 1998, the Pact on Energy and Environment was signed by representatives of government institutions, of economic and social forces and of environmental and consumer organisations, confirming the new mode of selection and implementation of the country’s principal energy/environment objectives. That Pact, combined with other instruments of negotiated planning, constitutes both corollary and instrument of a policy of concertation, which by its very nature, prevents disputes arising between the various parties involved, and thus limits the costs of environmental conflict. In a context in which the principles of globalisation of markets and economies is becoming established, the European Union is developing a single market for electricity and gas, and environmental aspects are increasingly important, the Government indicated additional priorities in the energy field in the concluding document of the 1998 National Conference on Energy and Environment, in addition to the signing of the Pact on Energy and Environment:

• Reorganisation of the electrical industry (known as the Bersani Decree) • Resolution on the Kyoto protocol (CIPE Deliberation) • Introduction of the carbon tax • Implementation of the Bassanini Law (relevant to procedures to streamline public

administrative activity and decision and control processes). The most important Italian laws on energy efficiency are the Act 10/1991 and connected Decrees (412/93 and 551/91). Local Authorities are responsible for the local energy policy and therefore enabled to implement the Energy Services and TPF schemes through the Act 142/90. The general goals of the national energy policy coming from the Italian legislative framework are:

• to increase the improvement of the energy’s environment sustainability through the rational use of local resources;

• to increase the energy efficiency for end-users; • to foster, even through financial contributions, the clustering in the energy sector

among local authorities and between local authorities and companies operating in the services management.


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The Environment Minister in accordance with the Industry Minister recently approved a document fixing specific goals Local Authorities must reach in the next years:

10% reduction of CO2 and greenhouses emissions compared to the 1990 year level within 2010; doubling the usage of Renewables within 2010 (by the current 6% to 12% of the National Energy Accounting); over 15% electricity saving within 2010 (45 TWh), compared to the current electricity consumption in the country.

As for ESCOs, in the Italian legislative framework:

• there is not a legally relevant definition of ESCO consequently, • there is no discipline of ESCO’s contracts.

This means that ESCOs now still refer to the general discipline concerning contracts and companies (Civil Code). The first legislative reference to ESCOs is within 2 decrees (24th April 2001, substituted by a new edition of 20 July 2004) that forced electricity and gas utilities to realise increasing levels of energy saving. First amongst Italian Regions, Tuscany has set up the first and only definition, in the public administrations context, concerning ESCOs (Sector Voluntary Agreement for energy efficiency through ESCOs). The agreement foresees the creation of an official list of ESCOs and it is established in order to foster the TPF schemes at local level (www.rete.toscana.it/sett/pta/energia/mercato/menu.htm). This way the Region aims to decrease the energy demand for more than 270 millions KWh, with investments for more than 103 millions Euro in 10 years. In spite of these initiatives and of the legislative framework, up to now it was not actually possible to develop an effective energy saving policy. The delay in trying out new actions allowing Italy to be within the Kyoto Protocol framework, represented a good reason as well for fostering and promoting energy saving initiatives since the beginning of 2005. Currently the 2 last Government Decrees (20th July 2004) allow to start up a new energy saving policy. The 2 decrees foresee two interesting incentives (investments’ partial recover for utilities, based on “white certificates”) and one disincentive (if utilities do not produce enough white certificates, they can be economically punished). Real estate companies are interested in energy services, but they tend to subcontract global services regarding the whole O&M of their buildings, so that improvement of energy performance is not a priority. They are nevertheless very interested in the opportunity of a fiscal reduction (VAT at 10% instead of 20%) allowed by a national regulation for energy services based on the provision of the comfort level in rooms, including all the required operations (see below for details).


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The general situation for public bodies In Italy the situation of the energy performance of public buildings is in general very bad. The main reasons must be searched in:

• the lack of resources for investments by the Local Administrations, • the commitment of Operation and Maintenance (O&M) of the heating systems to local

caretakers or installers, without technical and financial capability for energy investments,

• the avoidance of public tenders for energy services (in many cases the services are committed directly to the former Municipal Utilities)

• the poor performance of energy services (even if regulated by a National Decree on energy saving), limited to the minimum O&M to keep the systems running.

Several measures should have been taken for increasing the efficiency energy level of the public sector. Municipality Energy Plans should have been established, the new public buildings should have used the Renewables, the Premises Regulatory Plans could have used energy efficiency criteria but the majority of the Municipalities didn’t afford to implement such policies. Recently, through the energy market liberalisation, even the Public Authorities are allowed to directly sign gas and electricity supply contracts, in the attempt to significantly reduce the overall expenditure for energy consumption. Concerning the overall energy saving potential, every year roughly 5000 kWh only for public lighting is consumed. The saving potential is at least 30-35%, as most of the lighting plants are obsolete. From the available experiences the energy saving potential for energy efficiency interventions in existing public buildings is in the range 15-25%. A survey carried out for the Province of Modena testifies that among the 893,5 GWh consumed in 2003 in the Tertiary Sector of the Modena District, 98,7 GWh were related to Public Authorities (public lighting excluding). Therefore more than 11% of the overall energy consumption in the Tertiary sector is covered by the Public Authorities activities. The whole tertiary sector in Italy consumes yearly 12.441.000 tep (Source: 2001 Enea Report on Energy and Environment), but unfortunately there are no national statistics available for the only public sector. The main constraints in the public sector for making measures to decrease the use of energy are:

• Lack of internal financial resources; • Scepticism about complex contractual schemes; • Lack of preparation/training amongst public officers.

The knowledge about energy services by Public Authorities is still quite scarce even if increasing.


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The general situation for the energy service providers Due to several historical reasons Italy didn’t experience an ESCOs development in the past years. Today there are 50 companies operating like ESCOs (applying and proposing TPF schemes). See on the web a preliminary list of Italian ESCOs: (http://energyefficiency.jrc.cec.eu.int/html/list_esco.htm#ITALY) The first experiences were made in the 80’s. The main obstacles to their development and spreading out concern:

• the contracts’ complexity (mainly for local authorities busy with tenders and technical specifications);

• poor environmental issues awareness/motivation; • lack of technical expertise/skills; • lack of interest by politics; • lack of information on ESCOs and new financial schemes (e.g. since 2002 the

Lombardia Region created a 100.000 Euro fund for Local Authorities in order to facilitate the diffusion of TPF. So far no Municipality or Province has asked for those resources).

The main actors in the energy service scene are:

• The local utilities; • The main private energy service providers in the 90ies (AGIP Servizi, now Cofatec,

ASTER, SIRAM, and the seven sisters); • The smaller providers (CPL, Tecal, Petrolifera Estense, Energon, and many other

local companies); • The suppliers in the CHP market.

From the ESCO's viewpoint, some barriers, which discourage ESCO operations, follow from:

• insufficient knowledge of the specific problem and of suitable contractual procedures, • too low expected profits compared with the envisaged risks, • legal barriers connected with bureaucratic difficulties in coping with public • Administrations' tenders.

The general needs for an improved energy services market Hurdles for addressing ESCOs’ interventions often exist as a consequence of end users’ management difficulties, such as:

• impossibility of having an independent expenditure budget; • difficulty of finding and organising data on energy consumption and expenditure; • limited available time to the organisation’s energy manager, who has often been

given that role as an addition to other main functions; • the problem of roles overlapping between the energy manager and outside energy

operators; • lack of motivation, at the root of which there is a scarce interest in the topic of efficient

use of energy resources combined with the uncertainty of budget cover for energy costs, independently of their entity.

Energy services and related innovative tools/schemes are not diffused among public bodies because of:

• the contracts’ complexity (mainly for local authorities busy with tenders and technical specifications);


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• poor environmental issues awareness; • lack of technical expertise/skills; • lack of interest by politics; • lack of information on ESCOs and new financial schemes; • an immature market for energy service providers; • a not effective engagement of bank institutions supporting innovative EE schemes.

An arising interest is growing in the lighting sector for many Italian companies available to operate through TPF mechanisms. This is due to several reasons. First of all, the fact that the lighting of large service production and industrial buildings is a sector that still shows considerable margins for energy and cost savings by either the improvement or a more rational use of the lighting systems. The ten rules for Energy Service contracts stated by the Tax Department. Energy Services contracts refer to the Act DPR 412/93, allowing Public Authorities to get a reduction by 10% of VAT. Specifically, the Tax Department established 10 rules that must be applied in order to get the reduction: 1. the contract must refer to art.1, comma 1, p) of DPR 412/93;

2. the Company will be responsible as foreseen in art.1,comma 1, o) of DPR 412/93;

3. The Company will be in charge of fuel procurement and management needed for the building heating.

4. The Company must compute the heating energy used by the end users, through a periodical report on the heat supplied by the boiler houses. The company must guarantee the plants reliability. Heating invoicing must be expressed in thermal kWh for each building.

5. Computing oh heating-thermal energy will use kWh as the only one allowed unit.

6. The financial value of the rate displayed in the invoice (Euro/kWh) must be connected with standard parameters, especially to the historical expenditure and to the fuel type, to the actual hours needed to address the indoor comfort conditions, to the energy saving to be reached with measures on building-plant system and through a more sound behaviour of the end users.

7. The Company will carry out the energy audits on the building-plant system, in order to design and implement the necessary measures to reduce the heating consumption.

8. The company will get the consumption coefficient (in kJ/m3/DD) for each contract year and must compare it to the one deriving from the analysis on the historical expenditure.

9. The contract must specify further measures proposed by the company in order to improve the energy efficiency of the building-plant system (also introducing technologies based on the usage of renewable energy sources (DPR412/93)).

10. The Company has the obligation to write down every implemented measure and the ones foreseen in the Appendix F of DPR 412/93 on the Boiler House’s book.


Specificity of public bodies The agreement with the customer’s management is fundamental to the success of a TPF action, in which it is essential to avoid:

• internal resistance to organisational change;


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• difficulties in human resources management; • unwillingness to see a supplier as a partner; • difficulties due to the complexity of contract negotiations and selection of a partner.

The following points represent the fundamental requisites in the preparation of a contract for a successful application of Third Party Financing schemes:

• energy diagnosis and feasibility studies that realistically evaluate the savings • obtainable through the action proposed; • technologies that adapt to the customer’s current needs; • high return on the investment and a short pay-back period; • availability of financing at highly competitive rates; • customer’s management truly interested in reducing the energy cost of output; • agreement with an energy services company of proven solidity and experience; • contracts that show clearly the division between customer and supplier of risks and

benefits associated with a Third Party Financing operation. A previous survey on TPF schemes in Italy carried out in 2002 concluded that:

• Interventions of ESCO in Italy adopting contractual formulas of Performance • Contracting and Third Part Financing are performed in CHP and lighting sectors;

nevertheless, this kind of operation is still far from widespread. The demand of PC services in the public sector looks at the moment very promising. Stability at the time of public administration structures and of their energy needs may be considered proper elements to encourage ESCOs in taking business risks. The efforts of Piedmont Region to achieve a standard contract specification for PC bids turned out into a definition of fair contractual relations between ESCO and client, at least within the public sector. Issuing decrees on primary energy saving, relevant to mandatory EE actions and involving trading of energy saving certifications, features as a mechanism to promote ESCO and TPF.

EPC, Energy performance contracting The available experiences of energy performance contracting in Italy are not very widespread. Most energy performance contracts have been implemented up to now in public real estates. They have been based on detailed energy audits, with diagnoses and suggestions of possible solutions. The following public call for tender was aimed at the combined supply of fuel, O & M and energy investment.

Public accountancy: When a PC is implemented, the Public Administrations shift the cost to the section of accounting related to yearly costs. The consequence is that the item related to energy investments is cancelled or strongly reduced. Usually the attitude is to calculate a contract duration sufficient to reduce the annual costs to the same level of the historical expenditure, where the energy investment depreciation is covered by the energy saving. Some further reduction can come from the discount operated by the winning tender, and from possible sharing saving mechanisms introduced in the service specifications.


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In many cases this regards the energy systems only, while the envelope investments remain in the investment part of the accounting, and is planned on a three-year basis (for example the substitution of single glazing with double-glazing, including substitution of window frames. The Municipalities are starting to afford new accounting solutions to write off the retrofitting, O & M costs of buildings. Some of them are trying to create, for example, fully public real estates. In this case the administration has only an annual fixed cost (like a rental) while all the management responsibility and costs are committed to the external real estate. It is still too early to derive general indications from these attempts. Public procurement: The Financial Law of the year 2000 tried to force Public Authorities to purchase products and services at centralised level, in order to reduce expenditure and optimise services and procedures. CONSIP, the company created by the Economy and Finance Ministry, was committed to set up in the last years different tenders concerning energy:

• Electricity supply: • Natural gas supply; • Heating and transport fuels supply; • Energy service;

The Financial Law of the year 2003 (articles 166-172) completely revised the 2000 scheme: contracts signed with CONSIP will be related to products and services having a national relevance only; Local Authorities are no longer forced but have just the opportunity to join the contracts. Furthermore Local Authorities have not the obligation for their contracts to refer to CONSIP price levels. Local Authorities are also free to make the decision of going on with the CONSIP contract already signed or interrupt it. For more details see the web site www.acquistinretepa.it.

The “Community law 2004” (n. 62/2005), transposing several EC Directives, has stated the prohibition for public administrations to commit services directly to companies partially owned by them, even if the private partner (not selected through tender) is a minor shareholder. This imposes to many administrations the need of organising call for tenders. In the last month of April, Italy specifically adopted the UE Directive on the criteria to sign contracts for Public Authorities. Now onwards, contracts could not be renewed automatically, but must be committed to totally public companies or to mixed companies having a private partner selected via call for tenders. The most recent calls prepared in Modena have a peculiar characteristic: a list of possible energy investments is proposed in the call technical specifications: the tenderer can select one or more of these investments, acquiring proportionally marks for its choices. Additional marks can be added, if the offering company suggests other valuable energy projects. This mechanism promotes green investments in buildings, and has been appreciated as a "Green procurement" procedure. Moreover, the two most recent calls included also a sharing saving mechanism if the gas consumption was reduced below a specified threshold (to motivate the final users and create a fund for promotional initiatives in schools).


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Other calls (see for example the Good Practice of Cremona Province) are based on a fixed amount per year and on an obligatory list of energy investments. Another problem arises from the maximum allowed duration of energy service contracts. Many public authorities interpret that the maximum duration cannot exceed 9 years, as this is the limit for the concession of energy, water or gas distribution in their territory. The subject is still debated.

Public organisation: The need of involving labour unions has been evidenced in some cases, particularly when large organisations are involved (Hospitals) and internal maintenance personnel is operating. The public or mixed utilities have participated in the calls for tender, but did not emerge as winners. The best performing offers came from private companies and energy service co-operatives.

Grouped procurement for energy and/or EPC contracts: As small Municipalities may have difficulties in organising calls for tenders, and conditions for energy performance need a minimum amount of at least 60.000 Euro/y fuel cost, in several cases grouped procurement has been suggested. Possible schemes are:

• associations of Municipalities (for example in mountain/rural areas); • public consortia created for delivering public services (offering to organise the call for

tender). Presently a consortium of 11 small Municipalities has committed an energy analysis to the local energy agency to verify the conditions for an EPC in the heating and/or electricity supply for buildings.

Profit sharing (Project and/or O&M incentives) There are a few experiences about the creation of ESCO composed of private entities and of local authorities, in the attempt of more efficiently sharing profits. Outcomes on this kind of experimentation are not still available.

Public accountancy The Municipality of Modena launched in 2001 the Voluntary Agreement with schools called "More energy to schools, more energy to the city". The agreement foresaw 50% contribution to schools of the monetary equivalent of the yearly energy saving in electricity and gas reached by the participating schools. The Energy Department calculated the base line of energy consumption for each school, averaging the last five years. The baseline is updated every year shifting one year ahead. If major modifications are produced in the buildings (for example renovation of windows or boilers) the calculation can be corrected. The main problem was to obtain a transfer in the public accountancy scheme from the money saved by the Accounting Department (paying the bills) to the Energy Department (delivering the incentive to schools).

Public procurement The Modena Health Authority, managing most of hospital and health facilities in town, introduced some years ago a saving sharing mechanism in the O & M contract with local companies. Unfortunately this clause did not produce any effect, as the O & M people did found any interest in investing in energy. This experience confirms that short contracts and simple O & M companies are not suitable for acting as ESCOs.


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Public organisation After the Voluntary Agreement on energy signed by Modena Municipality with 7 primary schools, now being furthermore extended, the local energy agency, which signed the Agreement too, was expecting some contacts from schools for launching small energy saving projects based on zero or very low investment cost. On the contrary no requests have been advanced. This does not mean that the schools were not interested in energy saving. During visits to classes, histograms of room temperature were found hanging from the wall (LCD thermometers had been offered to each class by the energy agency), and child energy managers are still appointed each month, to check the switching off of electric lights. This on the contrary means that the schools personnel (teachers and manager) do not see their task in proposing energy saving projects, but limit themselves to educational activities.

Grouped procurement for energy There is no information of grouped procurement actions for energy saving initiatives within O & M activities.

Third Party Financing (Often partially included in EPC contracts) Third party financing includes supply contracting and performance contracting. Supply contracting is quite widespread in Italy in some industrial sector (for example ceramic tiles, paper industry, food industry) for CHP supply. Even if there are not Italian manufacturers of key components (turbines and internal combustion engines) there are several companies active in supplying full systems. They operate as ESCOs, even directly or through other organisations (for example ENEL SI – belonging to the ENEL Group). Supply contracts are also used in the domestic sector for CHP-supplied district heating, usually managed by energy utilities. An intermediate solution between supply and performance contract is the “Servizio Energia” defined by the national regulation mentioned above, as the payment is based on the metered value of heated water at the outlet of the boiler. In common practice the contract includes also some price cap or some sharing saving mechanism to encourage reduction of fuel consumption.

Public accountancy The mentioned system based on a bill proportional to the supplied energy downstream the boiler house, has a very negative impact on the public accountancy system. The yearly expenditure in fact is not fixed, nor easily foreseen, as it depends on several variables:

• Seasonal changes of climate • Changes in user behaviour • Lack of control in regulations • Even voluntary excess consumption produced by the service provider, who has a

direct interest in increasing the billed amount of energy. This is why, after an initial enthusiasm, now most public administrations have become reluctant in face of this type of contract. The most recent calls in Modena have introduced some correcting mechanism: a maximum primary energy consumption limit, after energy investments, has been introduced (corresponding to the foreseen amount in the tender). A sharing saving mechanism has been added, to motivate the service provider in reducing primary energy consumption, and to also give explicit incentive to the final users. In public administrations in fact the final user is not directly paying the energy bills, therefore money


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has to be returned to him by transferring the amount from the saving of the accounting sector to the energy department in charge of the contract.

Public procurement The main problem for public procurements of this type is to respect the requirements fixed by the tax authorities to allow for the VAT rate reduction from 20 to 10% on "domestic" type buildings (includes schools). The main constraints are:

• to have separate meters for the domestic type uses and for the other uses (for examples gymnasiums in schools, used also by private sport associations).

• to have a periodical accounting which is based on real consumption as measured by the heat meters downstream the boiler house.

• The experience in Modena has shown that private companies participating to TPF calls have a very good tendency to make energy saving investments (the competition mechanism induces to multiply the investments).

Public organisation The public administrations have reacted very positively to these TPF calls. The main problem is the continuous control of the respect of the contractual obligations. This is why the public administrations have often requested the assistance of the local energy agency.

Grouped procurement for energy As already mentioned, TPF calls require a minimum amount of yearly energy consumption. Therefore several attempts are undergone to group smaller Municipalities, using the already existing consortia (Municipality associations), created for the purpose of centralising procurement. The Public Administrations can access to TPF under the rules introduced by the national Decree transposing in Italy the EC Directive on services. This Decree is Decreto Legislativo 17 March 1995 n. 157, further modified by Decreto Legislativo 25 February 2000, n. 65. This law, substantially confirming the EC Directive, states that the procurement is considered as a service procurement when the part related to works is of minor relevance respect to the part related to services. This relevance was initially interpreted in terms of money amounts, but recently (EC Directive Transposition Law 2004, issued 23 April 2005) stated that the relevance can be assessed in terms of priority of the service (where the works are ancillary). The public works are now ruled by the national Law 11 February 1994 n. 109 (Merloni - articles 19-21), further modified by the national Law 18 November 1998 n. 415 (Merloni ter - article 11).

Leasing Not implemented in the Italian context.


Public initiatives:


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In the context of the Greenlight Programme promoted by the European Commission, Italy is the Member State with the largest Local Authorities participation. The GreenLight Programme is a voluntary pollution prevention initiative encouraging non-residential electricity consumers (public and private), referred to as Partners, to commit towards the European Commission to install energy-efficient lighting technologies in their facilities when (1) it is profitable, and (2) lighting quality is maintained or improved. GreenLight was launched on 7 February 2000 by the European Commission Directorate General Energy & Transport. The objective of the GreenLight programme is to reduce the energy consumption from indoor and outdoor lighting throughout Europe, thus reducing polluting emissions and limiting the global warming. The objective is also to improve the quality of visual conditions while saving money. The core of the programme is a registration form, signed by the Partner and the Commission, in which the Partner commits to:

• For existing spaces: either upgrade at least 50% of all the eligible spaces owned or on long term leases or reduce the total aggregate lighting electricity consumption by at least 30%. Eligible spaces are those spaces where the lighting upgrades are profitable.

• For new spaces: choose new installations so that no alternative installation exists that would: maintain or improve the lighting quality provided by the chosen installation and consume less electricity and represent a supplementary investment which would be profitable.

In addition, the Partner shall complete the upgrades within 5 years of joining the programme, send a progress report every year and appoint a Corporate Manager responsible for assuring the programme execution. The programme is totally voluntary, which means that companies are free to decide whether they want to join or not. If a Partner cannot meet minimal space requirements or reductions in total lighting energy, they may drop out of the programme without any prejudice to rejoin when their situation changes.

In 2002 the Italian Network of Energy Agencies in cooperation with the Environment Minister, published a booklet on ESCOs to be distributed among Local Authorities. The booklet is very useful as it presents at the very beginning ESCOs, advantages and obstacles of connected financial schemes (TPF). It displays many best practices on TPF schemes at national level and all over the Europe as well. An innovative and more recent initiative in Italy on the “promotion of the rational use of energy in the procurement of tools and services for the Public Administration” was carried out by the Emilia-Romagna Region in October 2003. The Region decided to start up a deep discussion among the main stakeholders of the Region. An effective working-group was then established and it worked up to November 2004. The working group was composed of Energy Department representatives of different public bodies (Local Authorities, Social Housing organisations, Hospitals). The final results the working group reached concerned:

• the definition of technical specifications to be put in the contracts related to energy services;

• the approval of a regional inter-sector document addressing public authorities towards more innovative mechanisms including energy efficiency indicators in contracts;


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• the need of further studying the feasibility of Energy Procurement Groups. A more detailed framework is needed.

Finally, Cremona Province and the Hospitals of ASL n. 14 of Piedmont Region experienced two of the most successful initiatives in the field of TPF and Energy Efficiency Services (for more details see the Best Practice Reports).

Private initiatives: In Italy many private companies, differing one from the other for size, activities, kind of enterprise, act as ESCO. Even if currently there are 50 ESCO on the Italian market and the first ESCO were born in the 80’s, they have still a long way to go. The oldest ESCOs started operations in the field of industrial CHP, designing, installing, operating and maintaining the unit, realised at the user-enterprise site. The user-enterprise signs a contract where it engages itself in the purchase of minimum yearly amounts of electricity and heat, at a contractually agreed price. The contract is a typical "energy-supply contract". More recently, a list of ESCOs was created in the frame of the "Greenlight" EC programme, which has been particularly successful in Italy. Even if defined as ESCOs, several companies simply proposed leasing contracts for lighting efficient equipment or simply delayed payments. In the last year a large number of enterprises have registered in the list of ESCOs organised by the Electric and Gas Authority, in order to be admitted in the "White Certificates" programme launched in Italy by the two Decrees of July 20, 2004. This definition of ESCO is not very accurate: actually the so-called ESCOs have to organise programmes for the installation of equipment for a minimum quantity equivalent to 100 toes, to obtain the white certificate and trade it. They do not have to invest themselves, nor to assume technical or financial risk. It is sufficient that they demonstrate to be the unique promoter of the purchase. For more complex interventions, the ESCOs have to present a monitoring programme (comparing energy consumption before and after intervention, have it preliminarily approved by the Authority, and finally present results. In this latter sector operate some recently privatised utilities, as they are the subject of the obligation to fulfil fixed amounts of energy saving, according to the two mentioned Decrees (a few skilled ESCOs have also received similar approvals). The Authority started to approve the first 10-20 monitoring projects in mid 2005. One of these projects concerned the buildings of Modena Municipality (installation of condensing boilers). A last category of ESCOs operates in the heating field, applying contracts of the "Servizio Energia" type. They have financial capabilities, technical skills, and create joint ventures among O & M companies, engineering companies and installers. They very often operate with public administrations, due to their security in financing the investment cash flow, their usual shortage of resources for investments, their often-obsolete systems in buildings. Other typical sectors are the condominiums, large residential estates and in minor part hospitals. Street lighting is still quite an unexplored sector for private ESCOs (a single example was found in a small Municipality in Lombardia Region).


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For a complete list of ESCO operating in Italy see the link http://energyefficiency.jrc.cec.eu.int/html/list_esco.htm#ITALY Bibliography/Data Sources - AltrEconomia magazine - ENEA – Rapporto Energia Ambiente 2003 - Energo Club Dossier on ESCOs - IEA DSM Task X – Performance Contracting, Country Report, Italy - Antonio Capozza,

CESI, Italy - RENAEL – Dossier on ESCOs in Italy - Report on the Emilia Romagna Region working group for energy efficiency in public

sector - Web site FIRE – Italian Federation for the Rational Use of Energy (www.fire-italia.it) - Web site of the National Net Distribution Manager (www.grtn.it)


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3.3.7 Country: Sweden OVERVIEW

THE HISTORICAL SITUATION IN SWEDEN Almost 40 % of Sweden’s use of energy is related to the building sector, and several reports from the Swedish Energy Agency and EU shows that it is economically possible to reduce the use of energy in buildings with approx 20 %. However, today substantial parts of this potential aren’t realized due to a combination of relatively low priority and insufficient resources to realize projects within many public real estate companies. To support the process of making buildings more efficient, and create a complementary activity to their technical projects, the Swedish Energy Agency in year 2002 decided to investigate and try to explore the Possibilities with Energy Services. In an international comparison Sweden has a very well functioning framework for technical installations in buildings. But when it comes to frameworks for alternative financial and contractual solutions such as Energy Services, Swedish real estate companies are still relatively undeveloped in relation to USA and other more progressive countries in Europe. In the early 1980th efforts where made to establish so-called Performance Contracting and Third Party Financing in Sweden. Most of the projects carried out were technically successful, but the lack of experience regarding contractual and financial models, often resulted in doubtful deal structures and dissatisfaction among both customers and providers, and many companies left the business.

The general situation for public bodies Most public bodies and real estate owners are facing a complex situation regarding energy efficiency, conversion to renewables and refurbishment of premises. On one hand the national and European demands increases due to energy and environmental goals, but at the same time are the resources and funding being cut down due to restrictions in public spending and an overall strained public budget. In this case could the Energy Services contribute substantial in meeting the energy and environmental goals. But many public bodies haven’t discovered these possibilities yet, and others are still inexperienced and therefore often reluctant to use the services. This situation represents a “double” problem for the public bodies. First they don’t require the services from the market, the only market development will be from the providers, but also since they often opt out of talks and negotiations since they feel insecure, even though the savings potential is substantial. The legal framework and the law regarding public procurement etc. aren’t any major problem if you use them right. But unfortunately there is a widespread precipitation that Energy Services are very difficult to combine with public procurement.

The general situation for the energy service providers In the early 1980th a first attempt to establish Energy Services in Sweden was made, but it wasn’t very successful due to immature business and contractual development. However, since year 2000 a new introduction of Energy Services and Performance Contracting has been made. The introduction has partly been made through minor specialised Swedish companies, but the main work has been done through larger companies with international owners and long experience from Energy Services in other countries. In this process has also the Swedish Energy Agency started to get involved to support a high quality implementation.

The general needs for an improved energy services market


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In order to promote a high quality introduction of Energy Services in Sweden, and at the same time increase the knowledge and support the capacity building among public bodies and real estate owners, four main issues needs to be addressed: 1. Information and education efforts targeted to the real estate owners and the

establishment of national and regional information centres. 2. Capacity building among real estate owners and public bodies through the elaboration of

client specific references, and the development process guidelines and verified structures for contractual matters.

3. Practical and competition neutral support and assistance to public bodies and real estate companies that are in the process of establishing Energy Service contracts.

4. To leverage the usage of Energy Services from mainly being used for energy conservation, to also being integrated with refurbishment and modernisation projects.


Survey of the specificity of public bodies After doing a survey of the public bodies usage of four different types of Energy Services, two things are clear. First, there aren’t any clear distinctions between the different types, and secondly that an Energy Service contract normally contain components from two or more of the types. Below is a summary aiming to describe the four different types of Energy Services based on their main characteristics and their market precipitation.


Public accountancy: In an EPC-Contract the Energy Service Company normally charges its customers in according to a pre-agreed payment plan, based on the delivered savings and increased value crated for the customer. The invoicing includes VAT since the services is subjected to VAT, but since there aren’t any definite accounting rules and the interpretation of the Eurostat-PPP documentations regarding Public Private Partnership aren’t finished yet. It’s basically up to the public customer to chose if the payments to the Energy Service Company would be treated as running expenses (out of balance sheet) or as an investment (on the balance sheet). The Eurostat PPP document will be ratified by the Statistiska Centralbyrån - Statistics Sweden, and lies one of the single most important interpretations, namely the classification of a public-private partnership. The problem is where to draw the fine line between pure commercial business and a public-private partnership. This is an issue, not only for Sweden, but for all countries involved since the classification needs to be equivalent for every country.

Public procurement: The Act on Public Procurement contains general provisions concerning public procurement. It has been modified over the years to accommodate the GPA as well as the commitments entailed by Sweden's membership of the European Union. The Act itself does not present any restraints to Energy Services. It is rather the customer’s lack of knowledge and experience in working with the Act that present an obstacle. The purchase of an Energy Service contract differs in several ways from the purchases made on


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a more frequent basis. It’s a more complex nature and the qualifications on which decisions are made, are rather conceptual and not always quantifiable. The complex nature of the services normally call for a “Negotiated Purchasing Structure”, that’s fully allowed and also well in line with the new European Purchasing rules including “Competitive dialogue”. Since many public actors are inexperienced and insecure regarding the issue of negotiated purchasing the process of adapting is slow among the public bodies.

Public organisation: One of the greatest obstacles in terms of public organizations' appreciation and acceptance of energy services, is the extensive decision-making process and the large number of people and decision levels involved in making a decision within a public unit. In order to be successful with Energy Service marketing towards municipalities or public bodies, you must understand and address the main goals of each decision level, but also avoid internal opposition, by not diminishing the O&M staff. The Municipal Council makes wide-ranging decisions. Among these are goals and visions for the municipality, what departments should be established within the organization, and greater local fees. The Council decides on the municipal tax and is also the unit granting each department their annual budget. Larger contracts normally need approval from the council, so it’s essential to be able to present the project in a way that it support the Municipal councils overall objectives.

The Municipal Audit is part of the Council with the purpose of evaluating, controlling and also making the organization more efficient whenever possible. The Audit performs an annual review of all Board's activities as well as the activities of each department. Before entering into larger contracts or taking on substantial expenses, approval is normally needed from the Municipal Audit, therefore it’s essential to understand and adapt negotiated Energy Service contract in according to the requirements by the Municipal Audit. The Municipal Executive Board is the political body with daily and direct responsibility and management of all the different departments. The Board is responsible for the implementation of the decisions made by the Council and also managing and coordinating common goals, and the development of strategic issues such as environment, economics, IT, international relations and human resources. Lower levels in a municipality or public body normally don’t start any negotiations of Energy Services without acceptance from the executive board, so it’s essential to be able to present the project in a way that it directly support and facilitates the daily work of the executive board. The O&M, Operational and Maintenance department of the municipality or public body, is normally also responsible for energy management, even though most of the organizations are understaffed and lacking the resourced to carry out more substantial energy management tasks. Within these organizations there are often also reluctance towards Energy Services etc., due to the fear of losing jobs and for being considered not doing there job properly. Therefore it’s essential that any marketing effort and contractual negotiation take in account and address these fears and opinions in a constructive way, otherwise you face implementation problems.

GROUPED PROCUREMENT FOR ENERGY AND/OR EPC CONTRACTS: There are no tendencies on the Swedish market of any grouped procurements within the public sector, except for electricity supply. The main reason for not doing so is the difficulties in determination who, and how, such a purchase would be taken up on a balance sheet. However, some collaboration in developing joint qualifications for the evaluation of proposals concerning Energy Services has been noticed among county councils and municipalities.


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The closest thing to a real grouped procurement on the Swedish market today is when a county council, which incorporates multiple hospitals, made a procurement involving all hospitals in the county. The county council is the sole administrator and customer, but the project will be implemented and specific, for each hospital involved. Grouped procurement could also be interested in the perspective of the Energy Service Company, since there are Contractors who will only work with a certain quantity, either in square meters or in number of facilities, in order gain economy of scale.


Public accountancy: The Profit Sharing contracts in Sweden is almost entirely focused towards O&M, Operational and Maintenance contracts, where a contractor (Energy Service Company or other) is responsible for the operational and maintenance of the technical infrastructure in a clients premises, and within this contract can benefit financially if he manages to cut energy and operational costs etc. The contract are normal service contracts including VAT, that normally is considered as running expenses and therefore not affecting the balance sheet unless there is a component of financing involved.

Public procurement: In Sweden, profit sharing contracts are regulated by the AFF. The AFF includes definitions of approximately 80 phrases that are of significance when using public procurement as a means to come by a facilities management entrepreneur and thereby related services. The definitions in AFF have been developed by the AFF Committee and Svensk Byggtjänst. The procurement process works in according to the Act on Public Procurement as previously described for EPC, but for this kind of contracts the process is quicker and smoother due to a more mature market.

Public organisation: Profit Sharing in terms of O&M contracts present an opportunity for a public body or real estate company to have the technical management and maintenance taken care of by a contractor, with possibilities to share profits with the customer if he succeed in cutting energy or operational costs. The challenges facing the contractor in pursuing a profit sharing project is first of all, the general suspicion within the customer's organization towards the private organization (profit driven) that now is willing to share profits. Further, when a contractor takes over daily management there is a certain amount of uncertainty involved, concerning internal hierarchy; unofficial leaders, positions, job specification etc. Another issue to consider when taking over daily technical maintenance in facilities is the daily contact with the customer's tenants that often needs to be handled with care. When marketing or response to a tender for an O&M/Profit Sharing contract, it is as important to evaluate the customers internal organization and relation to their tenants, as it is to thoroughly examine their technical infrastructure. Otherwise an Energy Service contractor could find himself fighting a war on two fronts.

Grouped procurement for Profit Sharing:


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There are no tendencies on the Swedish market of any grouped procurements within the public sector and profit sharing contracts. The main reason being the difficulties regarding who, and how, such a purchase would be taken up on a balance sheet. Also, in the specific case of profit sharing contracts, there is the issue of how to decide who is to be awarded for what. Grouped procurement could also be interested in the perspective of the Energy Service Company, since there are Contractors who will only work with a certain quantity, either in square meters or in number of facilities, in order gain economy of scale.


Public accountancy: Third party financing is becoming a more frequent way to finance larger building and infrastructure projects in Sweden. This alternative way of financing is often used when a customer can’t, or doesn’t want to, take a loan from a bank or use own capital to finance a project. A project with third party financing does normally consists of three parties and two types of contracts. The first type of contract is between the customer and the contractor and compiles the condition for the practical implementation of the project including the contractor’s saving guarantees, and it doesn’t affect the accounting. The second contract is between the customer and the financier, it’s separated from the implementation contract, and consists of the contractual payment schedule for the project. The accounting rules depends on how the customer chooses to classify the project, running expenses or investments, and in Sweden there are examples of both. In the first case the third party financing can, in accordance with Eurostat's guidelines, be considered as off-balance. However these issues are up to each organization to decide upon.

Public procurement: On an overall level public procurement of third party financing are handled in same fashion as described in section 2.1, "Public Procurement". But Third party financing is, thus far, a relatively unfamiliar way to finance energy efficiency and refurbishment projects and confusion around the specifics are still common. The most curtail issue to address regarding public procurement is the understanding of the two-contract structure, and that third party financing shouldn’t be procured or treated as a financial service alone, but as an integrated part of an overall project implementation

Public organisation: From the customer's perspective, the largest benefit of third party financing is that neither own capital nor a loan is needed to finance the project. All costs, including the cost of capital, are accounted for throughout the contract period by the agreed, and also often guaranteed, savings. This gives the customer an opportunity to use and reallocate existing investment funds within the organization to other needs, or co-invest the funds into an even larger project. However, there also exists general skepticism for this kind of alternative financing methods, that’s unfamiliar for public organizations. In order to increase the acceptance and appreciation of the services, it’s important that the contractor provide the customer with extensive information concerning this matter, and especially provide examples of how other public customers have dealt with this kind of issues in the past. Another important issue to communicate is the real cost of capital. In many cases are the cost of a third party financing structure over 10 years, being compared with short-term floating interest rates, which is an incorrect comparison.


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Before approaching a public body or municipality with a third party financing solution, it’s important to coordinate it and anchor the structures with the customers financial officers, otherwise reluctance from their part can stop further project development.

Grouped procurement for Third Party Financing: Grouped procurement has not yet been used in Sweden for Third Party Financing, and it’s not likely to develop either, due to the very customer specific solutions. However, as mentioned under 2.1 and 2.2, there is a tendency of increased early coordination and knowledge transfer among main administrative institutions regarding procurement and financial issues.

Leasing Leasing gives the leasee the right to make use of an asset for a certain period of time, regulated thorough a contract, by paying a monthly/yearly fee - rent. There are two main forms of leasing available for the public sector; operational leasing and financial leasing.

Public accountancy: The accountancy of a leasing structure mainly depends on what type of Leasing that’s applicable and how the public bodies choose to look upon the contracts. Leasing contracts for Energy Performance Contracting is often designed with a positive or cost neutral cash-flow for the customer over the contractual period, and could therefore be looked at and accounted for as a running cost and not an investment. Regarding VAT-rules etc. the Energy Performance Contracts carried out under a leasing agreement apply to the customer’s normal VAT rules, since no specific conditions apply. Regarding accountancy it’s important to understand that Financial leasing has many resemblances with a purchase by installments, where the leasee enjoys the financial benefits as well as takes the financial risks of owning the leased item. Financial leasing involves three parties; supplier, financier and leasee.

Public procurement: On an overall level public procurement of Leasing Financing is handled in same fashion as described in section 2.1, "Public Procurement". But since Leasing Financing still is a relatively unfamiliar way to finance energy efficiency and refurbishment projects, confusion regarding the different types of leasing, (operational and financial) are still common. The most curtail issue to address regarding public procurement is the understanding of the two leasing types, Financial and Operational leasing. When using Financial leasing (similar to third party financing), its important to explain the two-contract and three partner structure. As with third party financing, Leasing financing shouldn’t be procured or treated as a financial service alone, but as an integrated part of an overall project implementation. Before approaching a public body or municipality with a leasing solution, it’s important to coordinate it and anchor the structures with the customers’ financial officers, otherwise reluctance from their part can stop further project development.

Public organisation: From the customer's perspective, the largest benefit of leasing financing is that neither his own capital nor a loan is needed to finance the project. All costs, including the cost of capital, are accounted for throughout the contract period by the agreed, and also often guaranteed, savings. This gives the customer an opportunity to use and reallocate existing investment


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funds within the organization to other needs, or co-invest the funds into an even larger project. However it’s also some skepticism regarding leasing solutions due to a history of misuse and misunderstandings regarding the applications of Operational Lease (Service, Maintenance; Insurances etc including some extent of financing risk is in the hand of the Leasing company) and Financial Lease where in practice all responsibilities and risks stay with the customer. In the latter case, several of the responsibilities of the customer are covered by an Energy Service Company, as in the two contract structure in Third Party Financing. In order to increase the acceptance and appreciation of the services, it’s important that the contractor provide the customer with extensive information concerning this matter, and especially the allocation of responsibilities and examples of how other public customers have dealt with this kind of issues in the past.

Grouped procurement for Leasing Financing: Grouped procurement has not yet been used in Sweden for Leasing Financing, and it’s not likely to develop either, due to the very customer specific solutions. However, as mentioned under 2.1 and 2.2, there is a tendency of increased early coordination and knowledge transfer among main administrative institutions regarding procurement and financial issues.


Public initiatives: In order to gain more knowledge and to support and facilitate a high quality introduction of Energy Services in Sweden, the Swedish Energy Agency has started to cooperate in International, European and National projects such as: Task 10: An international project under IEA, International Energy Agency aiming to investigate and compare the development of Energy Performance Contracting in different countries, followed up by feasibility analysis and the development of a Swedish action plan to promote Energy Service Contracting. The result is available in English at: http://dsm.iea.org/NewDSM/Prog/Library/Upload/132/TX_CR_Sweden_Final_Feb03.pdf PU-Benefs: Is a EU-project aiming to inform and strengthen public bodies and real estate companies in the process of tendering and acquiring Energy Service contracts. The capacity building will be made through contractual and accounting support leading to at least two Energy Service contracts in each country. The web-page is under development, for more information please contact: [email protected] Eurocontract: Is a EU-project aiming to elaborate, try and evaluate different types of Energy Services and contracts, based on key success factors mainly from Germany and Austria. Complementary information in English can be obtained from: http://www.eurocontract.net Forum for Energy Services: Is a National project jointly run by the Swedish Energy Agency and Energy Agency of Southeast Sweden. The aim is to bring key actors regarding Energy Services and Performance Contracting to the table. By putting together customers, contractors, banks and technical consultants etc. can the process of overcoming mistrust and expectation gaps be accelerated Complementary Swedish information can be obtained at: www.energitjanster.se EPEC: Is a National project jointly run by the Swedish Energy Agency and the technical consultat firm WPS. The project aiming to develop the relatively well-known


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“Funktionsentreprenad” in the direction of performance based energy efficiency projects carried out within an O&M, Operational and Maintenance contract. Complementary Swedish information can be obtained at: www.epec.se

Private initiatives: The private initiatives regarding Energy Performance Contracting and associated leasing or third party financing issues is not very well organised in Sweden. One reason could be the lack of a kind of “Trade organisation” for Energy Service Companies that could promote Energy Services and act as a joint driving force when it comes to legislation, interpretation of policies and to visualise the benefits of the deal structure. However, there are on-going marketing work being done by the two major Energy Service Companies, and one of the major banks has also been giving speeches about third party financing etc.


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3.3.4 Country: United Kingdom

OVERVIEW

The historical situation in the U.K. At the earth summit, in Rio de Janeiro, Brazil, 1992, the UK Government, along with 153 countries, signed a declaration to limit the amount of greenhouse gas emissions on a global scale. Further concerns about climate change and the effects of global warming subsequently prompted changes to the UK policy framework for the use of fossil fuels. These policy changes include the use of economic instruments and setting up the Carbon Trust to manage the UK’s climate change programme. The UK Government also accepted the view of the Royal Commission on Environmental Pollution, that it should adopt a strategy which puts the UK on a path to reducing CO2 emissions by some 60% on 1997 levels, by 2050. The strategy pursued by successive UK Governments had been to encourage energy conservation, in particular through the adoption of an Energy Services strategy and the use of efficient technologies such as CHP. Of note is that a key issue deterring the use of energy efficient technologies in the Public Sector is the current low unit energy costs, notably for electricity and gas. This cost reduction became significant after the liberalisation of the energy markets in 1989, and became more marked within the electricity markets in 2001, after the adoption of the New Electricity Trading Arrangements. Government policies, designed to encourage the use of CHP, have inadvertently resulted in contracting the market by the combined effects of regulatory and fiscal measures. CHP policy analysts have subsequently called for a decision support framework for Energy Services businesses and have expressed “the need to develop a decision-making mechanism to be used as an internal tool for middle managers in Local Authorities. They can then be in a position to carry out an initial appraisal before a consultant is appointed to carry out a detailed study or design. The Energy Saving Trust (EST) - A Government Energy Agency - tasked to promote Energy Efficiency is of the view that a key solution to this anomaly is the development of a positive investment framework for Energy Services Companies (ESCO’s). The underlying principle of an ESCO as defined by the EST is an organisation that has the ability to carry out all aspects of Energy Services.

The general situation for public bodies Currently, UK Local Authorities do not have express planning powers to stimulate commercial energy efficiency in use. Some authorities such as Woking Borough Council, have however adopted supplementary regulations to encourage the use of CHP, into their planning decision making process. Regional planning is therefore increasingly becoming an important factor in energy management for Local Authorities. In Addition whilst fiscal policies do indeed have a place in Local Authority management, however the hurdles for investment in Local Authorities are more related to bounded rationality (information deficit), principal agent problems (short term investment criteria) and moral hazard (lack of environmental awareness). Local Mayors and Councillors are concerned with short term solutions and are frequently unwilling to seek tenders for selecting ESCOs to carry out traditional local Authority tasks, risking local jobs and diverting resources to third parties.


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The UK model is therefore moving in a direction of long term partnering agreements between Local Authorities and utility companies or specially set Local Authority companies such as Thames Energy (formerly Waltham Forest Energy Services). Contacts with local financial institutions have shown the potential support of local banks in investing in energy saving projects, if guarantees about good design, quality execution of works, transparency in all process are provided. The EST recently invited bids from Local Authorities & private sector partners for funding towards the preparation of a feasibility study and a business plan for setting up ESCOs in their respective regions.

The general situation for the energy service providers ESCOs are not a new concept in the U.K. ESCOs offer Independent consultancies on all aspects of energy supply and conservation offering research, consultancy and management of projects relating to energy use and energy efficiency in buildings, providing total energy asset management service, including CEM schemes. Other key actors such as local trade associations and local financial institutions are generally invited to participate in the consortia in order to foster partnerships dedicated to the implementation of performance contracts, according to specified guidelines and tender documents developed by the ESCO and approved by the Local Authorities. There are currently 12 registered ESCO’S, operating within varying aspects of the energy industry. The EST was keen to stimulate niche energy services approaches, where local authorities, housing associations and not-for-profit organisations work in partnership with the private sector to provide energy services. The EST provided information, advice and initial support as well as financial grants for setting up and developing approved projects on the following approaches: (1) Affinity based approaches, through partnerships agreements for energy supply and other energy efficiency services such as advice, loan finance and grant support. The customer will be offered energy supply along with other energy efficiency services. (2) Community- based Energy Services approaches, through partnerships with the private sector to supply packages of locally generated supply – usually through CHP – and demand side measures. The EST fostered the view that a successful energy services agreement will be a partnership between the private sector contractor and the public sector client. The contract should be open and co-operative, but with a clearly defined, approach to risk sharing, cost, staff issues. The public sector client must assign someone to be the project sponsor to ensure that the right contract is established from the outset. Although the contractor will relieve the client of much of the management burden associated with the contracted-out services, the contract must still be carefully managed throughout its duration and it is important that the client has a contract manager, to secure a partnership that works.


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The need for an improved energy services market (main obstacles) The need or opportunity for energy services may arise for a variety of reasons:

• the need for plant refurbishment or replacement • excessive energy consumption and cost • excessive operational costs • the requirement to meet energy efficiency and environmental targets • the poor quality of existing services • changing operational requirements or organisational restraints • the expiry of existing contracts

It is however becoming increasingly accepted in the UK that the energy services approach can help public sector bodies to realise energy, environmental and financial savings that are otherwise unattainable. It offers access to the investment resources and specialist technical skills which are needed to provide energy services on a cost competitive basis. The client organisation is therefore able to focus better on its core activities and transfer much of the risk associated with providing the services to the contractor. Energy services companies are also able to take a long term and strategic approach to energy since this is their core business. The results of a properly formulated and well managed energy services agreement will be more cost effective and efficient services provision, with reduced environmental impact of the Local Authority’s activities. Many obstacles however still exist and prevent the diffusion of energy efficiency services especially at local level amongst smaller municipalities. Traditionally in small and medium local authority areas the fuel for heating is purchased directly from municipal supply offices and the operation and maintenance is provided by local maintenance men in force to local call for tenders. Even all material for minor refurbishment is provided by local dealers. On the other side, the municipalities do not have enough financial resources for large investments in energy rehabilitation. The key barrier issues are:

• Lack of a legal framework for Local Authority participation in ESCOs • Regional/ Local Authority structural differences hence responsibilities. • Secure and effective partnering arrangements • Individual pricing & charging structures • Different Investment financing criteria from funding agencies • Lack of agreed common performance benchmark


Specificity of public bodies The energy services approach can help public sector bodies to realise energy, environmental and financial savings that are otherwise unattainable. It provides access to the investment resources and specialist skills which are needed to provide energy services on a cost competitive basis. The client organisation is able to focus better on its core activities and transfer much of the risk associated with providing the services to the contractor. Energy services companies are able to take a long term and strategic approach to energy since this is their core business. The results of a properly formulated and well managed energy services agreement will be more cost effective and efficient services provision, with reduced environmental impact.


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A successful energy services agreement would be a partnership between the private sector contractor and the public sector client. An open and co-operative, but clearly defined, approach to risk sharing, cost, staff issues and management will be at the heart of any well formulated agreement. The public sector client must assign someone to be the project sponsor to ensure that the right contract is established from the outset. Although the contractor will relieve the client of much of the management burden associated with the contracted-out services, the contract must still be carefully managed throughout its duration and it is important that the client has a contract manager, to secure a partnership that works. Both project sponsor and contract manager must have sufficient time and resources at their disposal, otherwise it is likely that the contract and its working will be deficient. Before embarking on the process of energy services contracting, public sector organisations are required to consider all aspects and deficiencies of the current provision and establish how changes may be of benefit to the organisation’s long-term strategic objectives. Particular considerations would revolve around:

• Limitations of available finance • Long term ownership of buildings • Transaction costs – Longer term cost implications • Bounded Rationality- relevant staffing skills and experiences • Organisational structure – Departmental responsibilities


Public accountancy: As the energy sector is one of the most capital intensive of any major economic sector. UK Public sector procurement policies are therefore intended to influence both the supply and the use of energy; and should aim to reduce carbon intensity. Public sector procurement makes it essential to avoid unnecessary investment on either the supply or demand sides. Despite lower energy prices, evidence still suggests that many kWhs can be saved cost effectively; and some saved more cheaply than the delivered cost to customers’ meters. This is despite the unavailability of investment allowances for energy efficiency investment by most small consumers, unlike for supply side energy investment. Further fiscal innovation (VAT, allowances, tax credits) might be required by the Government to level the playing field between the demand and the supply sides. Alternatively, suppliers are encouraged to use their investment allowances against company taxation to lease appliances and heating systems on the demand side. Specifically TPC contracts are allowed to claim Enhanced Capital Allowances.

Public procurement: The public sector accounts directly for only 5% of UK carbon dioxide emissions and from that, three quarters is for space heating and lighting. But this sector – in particular the Government itself – has a vital role to play in leading by example. Government, along with other public sector organisations, is taking action to improve energy efficiency. The central Government estate has an interim target to reduce CO2 emissions by 1% a year from 1999-2000, with new targets set in 2003 including on CHP.


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The review of government procurement has identified a number of areas where government purchasing could more strongly support sustainable development goals. The review has been considering how to build energy efficiency into government procurement and contract strategies, and identified some specific categories where products are already available which meet high energy efficiency standards. As a result, central arrangements were made, for departments to purchase goods with high energy efficiency standards and which provide value for money in areas such as IT equipment, boilers, lights and lighting systems, refrigeration equipment, televisions and washing machines. National Health Service (NHS) Trusts are already targeted to reduce the level of primary energy consumption by 15% or by 0.15 MtC equivalent, from March 2000 to March 2010. Since 2003 local authorities have been specifically required to benchmark their energy use in operational property and street lighting and set local improvement target in 2003/2004. Along with registered social landlords they are also required to bring their own housing stock up to decent standards by 2010. Detailed procurement targets have been developed alongside and complementary to the 2005 revision of UK Buildings Regulations and the methodologies for the implementation of the EU Buildings Directive, including building energy certification and labelling. The targets have the following common principles:

• They should be cost effective with a payback period less than the period of the procurement.

• They should be transparent, with easily understood methodology and calculations so that they can be used in the wider market.

• Performance against the targets should be monitored and publicly reported on annually.

Public organisation: Much research has been undertaken to examine the barriers to greater energy efficiency. These barriers are extensive and numerous. They include: the shortage, and high cost of finance; ignorance of cost effective opportunities and lack of information; a fragmented energy efficiency industry; managers’ unwillingness for risk taking; the small proportion of energy costs in total costs and other more urgent priorities; exclusion of external environmental costs in final energy prices; and falling real energy prices (so that big savings are made in bills but by price rather than quantity factors). Lower prices also lengthen payback periods for energy investment.

Grouped procurement for energy and/or EPC contracts: Many public organisations in the UK are part of group buying consortia especially for energy services. Kent council is an example of a utility purchasing consortium for Local Authorities in the South East. The NHS, Police and Universities also have specific energy purchasing consortia. There are no grouped purchasing services for EPC as these are considered for individual cases. In any event the utility purchasing consortia are designed to reduce primary energy costs and have little incentive for further energy performance improvements within buildings. There are a number of trade associations such as ESTA - Energy services trade association - that provide a benchmark technical services to potential EPC clients. During the past 12 years of its existence, ESTA has however made little in roads into the public sector market as they only provide information on their paid up members which does not meet public sector competition rules. With the opening up of the government estates to EPC there is a suggestion that other trade associations such as the CHPA (Combined Heat & Power Association), IFBM (Institute of


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Facilities and Building Management) would become more actively involved with the regulation of the supply of Energy services to the public sector.


Public accountancy: These structures don’t have any clear definitions for the UK public sector due to their broad approach and the implications for strict monitoring and accounting. Our general interpretation in this project is to focus on contractual approaches/structures enabling the contractor (ESCO or other) to benefit financially from cost cutting or efficiency increasing measures carried out within a contract with the beneficiary/client. The main applications are project improvement and/or incentive based O&M and energy management.

• In terms of project perspectives, the contract could cover a performance based delivery of energy services, where the supplier could benefit from developing “own” alternative designs and concepts that fulfilling the clients’ performance criteria at a lower cost.

• In terms of O&M, complete energy management services is the most common structure based on a contract where the contractor (ESCO or other) is responsible for the entire operational and maintenance of the clients’ premises, and within this contract can benefit financially if he manages to cut energy and operational costs etc. These include ‘active’ energy services for larger buildings, such as surveys, audit and best practice bench marking; installing, commissioning and operating CHP or other energy-intensive facilities; ‘build and operate’ contracts; competitive energy purchasing (for individual customers or via purchasing consortia); and provision of finance.

Public procurement: CEM – Heat with Rent A recent novel innovation for providing central heating to council tenants where Council are unable to fund such installations is the “Heat with Rent” concept. Basically capital funds are made available by the Gas (or Electricity) Authority to install individual gas (or electric) central heating. Capital repayments, on an individual basis, are made by the tenant over a fixed period (normally ten years) at a fixed, but slightly preferential, rate of interest. The Local Authority could assist with small capital contributions to reduce the cost and encourage tenants to participate. The Local Authority would underwrite the scheme although they would not be liable for individual tenant’s debt. Such a scheme would not have an affect on their Capital Controls. Tenants would al have options on the system they wanted. This could be a very basic system incorporating two or three radiators and a control and a simple programmer, or an advanced system with electronic controls, thermostatic radiator valves etc. CEM – Shared Savings Contract The contractor, using his own financial resources or in association with an investor finances and undertakes energy saving feasibility studies and the design, and installation of new energy efficiency equipment in the customer’s premises. The contractor owns the improvements either throughout their life or just for the duration of the contract, generally in the range of 5-10 years if a substantial investment is being made. The Contractor plays a direct role in the operation and maintenance of the new equipment either using his own staff or sub-contractors or training and overseeing the customer’s staff. The contractor may also purchase and supply fuel and energy on behalf of the customer. At


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the end of his contract the new equipment may be transferred into the ownership of the customer for a consideration defined in the contract or without consideration or the contract may be re negotiated or the customer may enter into a hire agreement at nominal charge to cover the remaining life of the equipment. The customer may have the right under the contract to purchase the equipment before the full term of the contract.

Public organisation:

See Public Accountancy.


Public accountancy: There are a number of ways in which this can be achieved, including:

• Maximise credit approval • Rent increases in return for lower fuel charges. Recent changes to rules governing

modular improvement scheme provide n opportunity to offset energy efficiency improvements by small increases in rent. Such schemes need to be agreed in consultation with tenants’ groups. Tenants readily understand rent increases when associated with clearly demonstrated energy improvements that work to reduce fuel bills and provide better comfort.

• Contract Energy Management (discussed in more detail below)

CEM – Energy Service Contracts The services provided under this form of contract include the same range of possible services as shared contracts and often include the purchase and supply of fuel and energy. The newly installed equipment remains in the ownership of the contractor and the options at the end of the contract period are also similar to shared savings contracts. Only the method of payment is different. Under an energy service contractor customer pays directly for the continued provision at agreed standards of agreed energy consuming services such as space heating, domestic water heating, lighting, air-conditioning etc. The price is set as some figure lower than the cost of providing these services prior to the installation of the energy saving improvements e.g.: 3% lower initially rising to 13% lower over a period of 10 years. The contract defines methods of adjusting the price in an equitable manner to allow for changes in weather, the price of fuel, building occupancy etc.

Public procurement: TPF is a procurement route that normally involves long-term contractual arrangements for the provision of a capital-intensive service to the public sector by a private sector organisation. In effective TPF procurement the public sector specifies the outputs it requires, and private sector consortia then compete to meet those output specifications in the most cost effective manner. The risks involved in the project are shared between the parties, with each party managing those risks they are best able. This approach to risk-sharing provides powerful incentives for the private sector to perform. Furthermore the integration of capital and life cycle costs provides an incentive to invest in more efficient technology up front to provide for lower life-cycle costs including lower carbon performance. In order for these positive incentives in TPF to realise better energy efficiency and other sustainable development criteria, public sector clients need to be equipped to recognise and


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give appropriate weight to these criteria throughout procurement. Sustainable development criteria need emphasis in procurement documentation and end-customers (for example individual NHS trusts) need sufficient experience to recognise energy efficiency and evaluate bids on a whole-of-life value for money basis. Joint guidance by the ODPM, OGC, DfT and Defra and available on the HM Treasury website – Green Public Private Partnerships – provides advice about how to take account of environmental considerations within Public Private Partnerships and TPF project teams, including project owners and managers, and in-house and external advisors as well as contractors.

Public organisation: The Government is committed to securing, over the long term, the most cost effective infrastructure for the public services. Where it is appropriately and properly used, Third Party Financing (TPF) can offer the best value for money from investment in public services through an optimal sharing of project risks between the public and private sector. Over 550 TPF projects have been signed to date, with a total capital value of £35.5bn, across the healthcare, education, transport, local authority and Government estate sectors. Around 10-15% of Total Investment in public services takes place through the TPF annually, with the remainder of public investment and central government procurement taking place through alternative routes such as leasing, design & build, or Prime type contracting.

Leasing

Public accountancy: Public sector procurement rules in the UK are currently designed to minimise the use of leasing for equipment that has a life exceeding 15 years. In the1980’s, leasing had been a common tool used by Local Authorities for portable heating equipment such a storage heaters, photocopiers and other forms of office equipment. There were however a number of high profile cases involving some Local Authorities that were using leasing to circumvent the stringent public sector financial controls imposed by the then Conservative Government. A number of public sector organisations extended the leasing concept to a wide range of materials and services notably those with left wing Labour administrations. The Government consequently introduced very stringent regulations that effectively included lease value within the public sector borrowing requirements, thereby identifying the value of leases within the financial allocation of public sector authorities and reducing their Government allocations commensurately. Leasing does however form a significant part of procuring energy efficiency equipment.

Public procurement: Types of leasing arrangements used in the UK: Financial leases are generally instalment purchases of energy efficiency equipment. The lessee makes no capital outlay to purchase the equipment and receives all the savings from the project. Operating leases are an arrangement in which the lessor owns the equipment, which is leased or rented to the lessee for a monthly fee. Municipal leases are available only to tax-exempt entities like cities, counties, public school districts and special districts. Master lease agreements are ‘umbrella’ contracts with general terms and conditions. This type of lease allows public bodies to fund many projects over a time frame. Certificates of Participation (COPs) are lease purchase agreements that are divided and sold to multiple investors, similar to stocks.


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Public organisation: Where some public sector authorities do wish to enter into leasing arrangements such as for energy efficiency equipment, this can be through a lease-purchase agreement between the public body, as the lessee, and the company providing the leased equipment and/or financing, the lessor. In a typical lease-purchase agreement, the public body agrees to pay a certain amount (lease payment) over a specified period at a particular interest rate. At the end of the term, the public body has the option to purchase the equipment at “peppercorn” price. The basic questions that need to be considered before entering into a lease are:

• How much experience does the lessor have in providing tax-exempt lease purchasing and financing for energy projects/

• How flexible is the lessor in structuring the financing needs? • Is the lessor known in the municipal finance industry? • Will the lessor be in business during the financing term? • Will the term of lease be within the useful life of the project? • The cost /benefit of the project.

In a typical lease arrangement, the lessor would require that the interest amount be ‘capitalised’. This amount is borrowed through the lease and set-aside to make the interest payment during the construction period.

CURRENT EPC OR THIRD PARTY FINANCING INITIATIVES FOR PUBLIC BODIES

Public initiatives A distinguishing feature between Local Authorities in the UK and those in other European Countries (except France) is the lack of responsibility for local energy planning and management. In the London context, the Greater London Authority Act (1999) requires the Mayor to prepare a state of the Environment report by 2003, to “include information on energy consumption and on emissions that contribute to Climate Change”. The Government has earlier showed considerable reluctance to move this level of Governance from a central to a regional level. The adoption of a Supplementary Planning Guidance document for energy efficiency and renewable energy use in new developments by Leicester City Council is also noted as some evidence of a changing role for Local Authorities in the area of sustainability planning. Whilst the Government is ostensibly not letting go of the central planning and control remit, it is perhaps unwittingly doing so through its devolvement of the sustainable development targets and the renewable obligations for regions. The main reason for the decline in energy services potential in the UK has generally been attributed to the introduction of New Electricity Trading Arrangements (NETA) in March 2001. By 2002 wholesale electricity purchase prices had been reduced by about 40% of 1990 levels. The introduction of NETA as part of the Climate Change package of measures was heralded by the Government as an encouragement for the use of energy services. The policy instruments relating to climate change were the Climate Change Levy (CCL), the Enhanced Capital Allowance and the Business Rates Reduction. Consequent concerns about a potential shortfall in meeting the Kyoto objectives, prompted the Government to set up a series of additional policy instruments, such a relaxation of the criteria for claiming CCL for CHP schemes to encourage the installation of CHP. The Community Energy Programme and the Energy Demonstration Programme in the UK, continue to offer financial incentives for energy services in the domestic sector.


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There is however no grant programmes specifically promoting the use of energy services by Public Sector Organisations (PSOs). The Finance Act, (2002), which allows the use of Enhanced Capital Allowances for third party contract investment, goes some way towards encouraging the use of third party financiers. Examples of Local Authority ESCO Initiatives: (1) Powys County Council - GreenHeat GreenHeat is a support package for renewable energy in rural Wales and specifically for small and community scaled/owned schemes. Its overall technical and funding advice and information service and feasibility fund covers rural Wales. The capital fund is available to projects in Powys Local Authority. It is co-ordinated by Powys Energy Agency through two full time employees, support of the Executive Director; and working with Ecodyfi and the Centre for Alternative Technology. The package is available to anyone interested in developing a RE project and in regard to any RE technology. Innovative wood based systems are particularly encouraged. On going promotion of GreenHeat has been essential, it took 6 - 9 months for the concept of the support available to become widely known and appreciated. Since then there has been an increasing number of enquiries, request for consultancy and for capital support. It is clear that there are many projects that people would like to see to fruition in the domestic, public and community sectors. The availability of hand-holding support, advice and funding is required to do this. As the first of its kind, GreenHeat and Powys Energy Agency was able to work with some projects which had been just ideas for many years. Results • Advice line has received 380 recorded enquiries, of which 280 were from householders. Supported 38 feasibility studies. These range from a morning consultancy to involvement in £ 45,000 feasibility study; • Enabled the completion of 17 renewable energy installations in Powys. This equates to

the generation of 579 kW from innovative wood systems (for heating), 11.4 kW from heat-pumps, 76.30 kW from photovoltaics and 5.7 kW from wind making a total of 672 kW installed capacity;

• Worked with public, business and community sectors on various projects.


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(2) Anglesey County Council – Arbed Ynni Mon –Energy Savers Arbed Ynni Mon Energy Savers was set up by Anglesey County Council to develop sustainable community projects in Anglesey. The key driver for creating AYM is to encourage the wider community to engage in Sustainable Development practices and to act as a focal point for exchange of information relating to Energy Efficiency and sustainable development in the rural community. It objectives are to:

• Assist the authority in pursuing its sustainable development objectives • Promote and protect a sustainable and safe environment • Promote the social welfare of the Island's Communities • Strengthen and develop local anti-poverty work in the Island

Promote and develop the use of renewable energy technologies

• Address the problem of fuel poverty in Anglesey households • Achieve affordable warmth for all households

AYM also envisages its longer term development opportunities in the following:

• Public sector contract energy management

• Solar Energy for street lighting

• Converting domestic refuse waste and Biomass to energy

• Combined Heat and Power projects for outlying farms, using biomass

• Gas supply to ‘non-gas’ towns and villages

• Solar and wind energy projects

• Tidal energy projects

• Encouraging the use of Renewable energy sources for public sector Transport fleets


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4. Best practice examples for energy efficiency services for public

bodies in eight European countries A high importance was given to study best practices concerning energy efficiency services for public bodies in the eight involved European countries. The objective was to study and find out the conditions of success for such innovative schemes. Each partner has produced 2 case studies, including at least one third party financing scheme. They are highlighting the obstacles that restrict the use of financial instruments and contracts for energy savings in regard to public bodies. These best practices are a useful source of information at a European level and were included in the produced booklets and are available on the web pages. 4.1 Grouping of best practice studies

4.1.1 Different groups To assemble the different case studies from the partners regions and countries, into an interesting overview of different approaches and experiences of public bodies, have a regrouping from country specific to sector specific been made. The intention is to give readers from countries with less developed energy service markets an idea of how things are being done in other countries. But the intent is also to show that different approaches and implementation structures are possible, and thereby encourage public bodies to formulate own ambitions and increase their involvement in energy service and performance contracting projects. The catalogue is divided into five groups, together giving an overview of best practices and a variety of approaches used by public bodies in different sectors.

• Hospitals

• Municipalities and Public Authorities

• Public real estate and housing companies

• Public schools and leisure premises

• Industries


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The table below describes the main characteristics of the best practice studies:

Best Practice Country Sector Main focus Contract type Size (m2) Amount (€) 1. Hospitals ASL 14 Regione Piemonte (Verbano-Cusio-Ossola)

Italy Hospitals Heating TPF 440 000 m3 22 000 000

Primary medical care centre "Anoia" Spain Hospitals Cooling O&M 2 500 1 678 320 Hospital "Arnau de Vilanova" Spain Hospitals Cooling O&M 56 000 1 152 000 Regionfastigheter i SkåneSweden Hospitals Heating EPC 450 000 10 000 000 2. Municipalities and Public Authorities

Municipality of Gunskirchen Austria Street

lighting Lighting TPF 36 200 139 000 Municipality of FreiburgPool 2 Germany Public

buildings Heating EPC 160 000 1 600 000 Municipality of Ettlingen Pool 1 Germany Public

buildings Heating EPC 170 000 2 124 000 Provincia di Cremona Italy Schools Heating TPF 750 000 m3 7 500 000

Municipality of Nyköping Sweden Public buildings Controls EPC 280 000 5 400 000

Basildon District Council United Kingdom Residential CHP TPF 700 000 3 500 000

London Borough of Waltham Forest

United Kingdom

Public buildings CHP EPC 40 000 200 000

3. Public real estate and housing companies

OPAC 38 France Residential Heating O&M 8 000 dwellings 4 330 000

4. Public schools ans leisure premises

Impavaara swimming hall Finland Sport/leisure Heating EPC 51 000 m3 210 000 Varissuo icehockey stadium Finland Sport/leisure Heating EPC 115 000 m3 200 000 High schools of Rhone-Alpes France Schools Heating TPF 3 500 000 18 900 000 5. Industries Rosenbauer International Austria Commercial Controls TPF 28 800 365 000

4.1.2 Presented and complementary information This best practice catalogue contains abridged summaries of the partners best practice studies, together with contact persons for more extensive information in a first part. The second part contains longer version of the best practice studies. In order to facilitate reading, will country references be included in the text description under each headline.


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4.2 Best practice

4.2.1 Hospitals

A. ITALIAN HOSPITALS In 1999 the ASL n.14 (including the 3 hospitals of Verbania, Ossola and Cusio), supported by the Piedmont Region, implemented a TPF contract on ”Energy service and plants technological renovation in order to promote the energy saving”. The initiative involved 3 hospitals provided with 450 available bed places for an overall volume of 440.365 m3. It was an energy service delivered accordingly to the Act n. 157/95 (restricted procedure call, assigned on the basis of the most economically advantageous tender). 3 ESCOs took part in the call. Technical specifications have been established by the Piedmont Region. In the 2001 Autumn the DALKIA ESCO won the call, making a proposal to reduce by 9% roughly the total operative costs (compared to the historical expenditure regarding the 1999 year). Actually it is supposed the saving is even more significant, since a remarkable difference in fuel price occurred between the year 1999 and 2001 (+20%). This way the ESCO could not propose a higher reduction on the financial tender. In case of future possible fuel price variations, the contract foresees a clause on price yearly update. 2 million Euros have been invested for energy efficiency measures. 1 million is set up to the implementation of 2 methane CHP plants while 1 other million funded measures related to remote sensed control systems on the existing energy production and distribution plants.

Customer contact: Filippo Baretti, Dario Bottiroli DirezioneTutela e risanamento ambientale, Ufficio Tecnico ASL n. 14 Piemonte Regione Piemonte, ASL n. 14 Piemonte via Principe Amedeo, 17 – TORINO +39 011 4323476 [email protected] [email protected] Service provider contact: Ing. Piermaria Beretta Società Siram spa Gruppo Dalkia di Milano Via Bisceglie, 95, Milano – ITALY tel. 02/41298224 fax 02/41298229 e-mail: [email protected]


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B. SPANISH MEDICAL CARE CENTER AND HOSPITAL

MEDICAL CARE CENTER “ANOIA”:

In fulfillment of the general policies on energy saving, a plan under the responsibility of the “Institut Català de la Salut” (ICS, Health Department of Catalan Government) has been started up a long time ago, in order to improve the performances of installations. For the existing installations as for new equipment, a criteria catalog has been established following this plan. These criteria include:

• Typology of the production equipment and of the air-conditioning terminal units • Typology of the installations’ auxiliary materials • Regulation and control • Insulation • Rational design of the installations • Measure of thermal and electrical power supply • Fuels and energy sources

Action was also undertaken on the financial sector and in this case, as it is a “Centre d’Assistència Primària” (C.A.P.: public medical care centre), an energy purchasing system tied to the services provided by the installations’ manufacturers has been established. The selection of energy provider was made by EISSA through public tenders. The chosen company was the one that fulfills the economical specifications and technical requirements of the Project. The level of savings was considered implicit within the improvement of the new equipment’s performance features, and as far as the chosen provider covers the expenses of the installation maintenance, this expense and its management are not considered direct costs of the sanitary Centre.

Customer contact: Health Department - Institut Català de la Salut (ICS) Direcció d'infrastructures Gran Via de les Corts Catalanes, 587 bis Planta 3 08007 BARCELONA Service provider contact: Mr. Josep Maria Granollers Project Manager EISSA Diagonal 453bis Àtic 08036 BARCELONA tel +34 93 622 05 00


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HOSPITAL “ARNAU DE VILANOVA”:

In fulfillment of the general policies on energy saving, a plan under the responsibility of the “Institut Català de la Salut” (ICS, Health Department of Catalan Government) has been started up a long time ago, in order to improve the performances of installations. For the existing installations as for new equipment, a criteria catalog has been established following this plan. These criteria include:

• Typology of the production equipment and of the air-conditioning terminal units • Typology of the installations’ auxiliary materials • Regulation and control • Insulation • Rational design of the installations • Measure of thermal and electrical power supply • Fuels and energy sources

We point out as energy improving factor the water condensation systems and the utilization of new refrigerants. The improvement plan would be completed with the substitution of the pumping and fluids system, and also with a redesign of pipe network, with the purpose of reducing distances and therefore the volume of circulating water. The Hospital “Arnau de Vilanova”, in Lleida, could be placed among the Health Department (ICS) buildings that could evidently be improved by performing an Improvement Plan of the installations, at least those corresponding to the main cold water production plant used for the Hospital air conditioning, which is showing big deficiencies in the operation and energy costs. We have also acted on the finance ambit so in certain instances an energy purchasing system has been established tied to the services given by the installation constructors. The objective of the energy services contract is to ensure a global service, from the installation itself until its maintenance and financing, in such a way that the contractor invoices a fixed monthly amount where all concepts are included. The obligation to establish a minimum of coefficient of performance (COP) for equipment (in particular in public installations), should led to a more competitive market between manufacturers, and therefore to a cost reduction of this equipment.

Customer contact:

Health Department - Institut Català de la Salut (ICS) Direcció d'infrastructures Gran Via de les Corts Catalanes, 587 Planta 3 08007 BARCELONA

Service provider contact:

Mr. Josep Maria Granollers Project Manager EISSA Diagonal 453bis Àtic 08036 BARCELONA tel +34 93 622 05 00


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C. SWEDISH HOSPITALS The background of the project is that Regionfastigheter Skåne that manages in total 1.5 million m2 of public premises, experienced a period of increased need of refurbishment and upgrading of their premises, and they identified substantial saving potential in energy and operational costs. But their investment potential was limited due to budget and public spending restrains, but also due to the lack of internal resources and experiences regarding large-scale energy saving projects. The aims and ambitions was to establish an Energy Service Contract with a service provider that could take on the responsibility for detailed energy analysis, full project implementation, development of financial solutions and provide firm savings guarantees. The internal preparation was crucial in order to avoid internal opposition and maximise the value of the future project. Therefore was almost the entire organisation involved in the early preparation work before tendering, and it was clearly communicated that this project didn’t aim to outsource or reduce staff. The purchasing and contractual process was conducted in line with the public procurement act, and started with a pre-qualification followed by feasibility audits and a negotiated procedure purchasing process comprising of three potential suppliers. The content of the project is energy efficiency, retrofits and refurbishment projects within three hospital areas in the region. In the projects total turnover of approx 11 million Euro, are also included substantial training and capacity building of the operational and maintenance staff. The Results of the project that started 2004/2005 are so far positive, and the initial training and optimisation efforts delivers saving beyond expectations. The gained experiences is that the planning and purchasing process of a project at this size is time consuming, and that you needs to be a team with complementary competences to carry out the tendering and contractual work. In an EU perspective it’s notable that the strong EU focus on PPP and Energy Services doesn’t seems to have effected the public authorities in Sweden, and that it’s essential for EU to emphasise its efforts to make the Member Stated ratify the Eurostat Guidelines and dismantle legal and administrative hurdles for Energy Service Contracting. Customer contact: Robert Johansen Director of Development Regionfastigheter Skåne Phone: +46 70 585 34 52 Mail: [email protected] Energy Service Company contact: Jonas Tegström European Business Area Manager TAC Energy Solutions Phone: +46 70 675 26 54 Mail:[email protected]


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4.2.2 Municipalities and Public Authorities

A. AUSTRIAN MUNICIPALITIES The municipality Gunskirchen can be found imbedded between the Alps and the "Hausruck" area (one out of four areas in Upper Austria) in a traffic friendly hollow of the Upper Austrians centre. With a surface area of 36.18 km² it is the largest municipality of the district Wels-Land. After World War II, Gunskirchen developed from an agricultural municipality to an industrial municipality, with 5,472 inhabitants at present. The part of the peasant population amounts currently about 8 %. As saving energy was always a main topic for the municipality, Gunskirchen started in the year 2003 an ECP/TPF project, with the aim to renovate the street lighting installations in the whole community area and to save costs and energy with this action. With the exchange and renovation of pillars, the implementation of new lighting control devices and the enlargement of the street lighting energy savings of 24,615 kWh per year and a reduction of the energy costs of 3,200 Euros per year are guaranteed. Also a reduction of 7.4 tons per year carbon dioxide is guaranteed. The total investment amounts 138,930.58 Euros. A financial support of 3,603.70 Euros from the regional government is given to the customer with the condition to use this money for refunding. The municipality wanted to reduce failures in the street lighting and in combination with that to reduce the grievances of the citizens. This should also be reached with the implementation of the best available technology. In the contract was also fixed that the maintenance of the street lighting has to be done by the energy service company which causes less work in administration, maintenance and operation for the municipality. All in all, the municipality of Gunskirchen is satisfied with the results of the project because all the project targets for saving energy are reached so far. Customer contact: Franz Mallinger Gemeindeamt Gunskirchen Marktplatz 1, A-4623 Gunskirchen, +43 (0)7246/6255-800, [email protected] Service provider contact: Helmut Krenmair EWWAG – Elektrizitätswerk Wels AG Stelzhamerstraße 27, A-4600 Wels, +43 (0)7242/493-0, [email protected]


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B. GERMAN MUNICIPALITIES ETTLINGEN The background of the project is the increasing effort of the local agenda group to implement an action plan for CO2- reduction targets. The municipality of Ettlingen has 38.000 inhabitants, manages about 60 public buildings, with total energy costs of 2 Mio. €. The budget for the energy saving measures and refurbishments in the public buildings has been decreasing in the last years. The action plan was to introduce third- party financed projects. The aims and ambitions was to generate a project, were risks for the savings and the investments could be delegated to an energy service company. The internal preparation was consisting of intensive communication process which helped to push aside hurdles within the municipality. The purchasing and contractual process was conducted according to the public procurement act. The municipality decided to involve the subsidiary municipal utility to implement the ESC project. The content of the project was oriented to the refurbishment of all heating stations with implementation of CHP and computerized control systems. In most of the schools, lighting systems were refurbished. The project started in 2004; the results so far show an exceeding of the guaranteed savings, which were 130.000 €/a. Customer contact: Mr. Hendrik Bubel Environmental officer Municipality of Ettlingen Marktplatz 1, D 76275 Ettlingen, email: [email protected] Service provider contact: Mr. Werner Seifried Sales department Stadtwerke Ettlingen Hertzstrasse 56, D- 76275 Ettlingen, [email protected]


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FREIBURG: The background of the project was the action plan of the greenhouse gas abatement plan stated in 1993, which foresee third party financed projects. Some projects have been already carried out as heating supply contracting together with the local utility. To start the next step, the town council decided to start an EPC in 2001. The aims and ambitions was to generate a project, were risks for the savings and the investments could be delegated to an energy service company. The internal preparation was consisting of intensive communication process which helped to push aside hurdles within the municipality. In further steps the missing data was collected together with external experts. The purchasing and contractual process was conducted according to the public procurement act. It started with a prequalification followed by feasibility audits based on a standardized ESC- contract and baseline information on the buildings. The purchasing process was negotiated with three ESCOs. The content of the project was oriented to the refurbishment of all heating stations with implementation of CHP and computerized control systems. In most of the schools, lighting systems were refurbished. The project started in 2004; the results so far show an exceeding of the guaranteed savings, which were 97.800 €/a. Customer contact: Name: Mr. Meik Möllers Title: Department officer Organisation: Municipality of Freiburg Contact information such as address, telephone and e-mail: Fehrenbachallee 12, 79109 Freiburg, email: [email protected] Service provider contact: Name: Mr. Stephan Weinen Title: Energy Management Organisation: ABB Contact information such as address, telephone and e-mail: Ohmweg 11-15, 68 199 Mannheim, [email protected]


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C. ITALIAN PROVINCES The Province of Cremona in the past used to sign contracts (for fuel supplying, O&M) running for 1-2 years. Since 1992, the Province decided to focus its policies on a more effective planning of energy efficiency measures. The Province, in fact, oawned many old and obsolete buildings needing a refurbishment-restoration, even in terms of heating plants. Especially 37 school premises had to be renovated and the overall amount of volume involved was roughly 750.000 m3. Nevertheless, while making this decision, the Province was not financially able to cope with the necessary investment. This way the Province chose to try out a TPF scheme. The renovation measures have in fact been implemented and funded by the winning company. A remarkable and encouraging energy saving was reached through simple measures related to remote sensed management and control systems.�� Customer contact: Name: Ing. Rossano Ghizzoni Title: Public works Department Organisation: Province of Cremona Contact information such as address, telephone and e-mail: Tel: +39 0372 406403 e-mail: [email protected] Service provider contact: Name: Ing. Federico Gianferrari Organisation: Cooperativa Orion S.C.r.l. di Cavriago (RE) Contact information such as address, telephone and e-mail Via B. Buozzi, 2 - 42025 Cavriago (RE) – Italy Tel +39 0522 544315 Fax +39 0522 942491 e-mail: [email protected], [email protected]


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D. SWEDISH MUNICIPALITIES The background of the project is that board of executives in the municipality of Nyköping, that manages in total 250.000 m2 of public premises, decided to cut the municipalities energy - and operational costs with 10 percent, motivated by financial and environmental reasons. The energy and real estate energy manager were assigned to develop and propose an action plan, but when presenting costs, the plan was rejected the manager then scanned the market for other solutions. The aims and ambitions was as much operational and managerial as technical, and Nyköping therefore strived to find an Energy Service Company focused on both energy savings, operational efficiency and the control systems needed to efficiently run the premises and the operation organisation, but also had the financial capabilities that Nyköping lacked. The internal preparation and anchoring process was relatively simple since a sense of urgency was present, and since the proposed project was presented in a solution oriented way, and therefore almost seen as a pain relief. The strong interest in organisational and human development characterised the preparation. The purchasing and contractual process was conducted in line with the public procurement act, and started with a pre-qualification followed by feasibility audits based up on proposed deal structures and clear demands regarding controls and operational systems. The purchasing process was negotiated and comprised four potential suppliers. The content of the project is strongly oriented towards the implementation of a computerised control, operational and maintenance system implemented together with optimisations and retrofits of the HVAC systems. The projects turnover is approx 5.5 million Euros and also includes targeted training and capacity building for the operational and maintenance staff. The results of the project started in 2002 is positive, and the guaranteed savings of 17 % and 10.000 MWh/year are already being exceeded, and the motivation of the maintenance staff has increased after training and the system upgrading. The gained experiences is that the planning and purchasing process of a project like this is time consuming and that the immaturity among public bodies and the lack of support from public branch organisations made it difficult to elaborate some of the structures for financing, accounting and contractual conditions. Customer contact: Bo Flinkberg Technical real estate manager The municipality of Nyköping Phone: +46 155 24 80 00 Mail: �� Energy Service Company contact: Jonas Tegström European Business Area Manager TAC Energy Solutions Phone: +46 70 675 26 54 Mail: [email protected]


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E. UK DISTRICT COUNCILS BASILDON: Langdon hills estate comprises of 556 dwellings, in Basildon District Council, Essex, UK. In August 1999 the Council sought to address a growing problem of inadequate heating provision on the estate by setting up a CEM contract with Waltham Forest Energy Services Ltd (now named Thames Energy Ltd). These constraints led the Council to initiate a tendering procedure which after a two year development process led to a private sector investment of about £2 million private sector funds as part of a £4m project for the installation of new energy efficient heating systems on the estate. The project was carried out in a social housing estate, which comprised 556 dwellings of 2 Bed, 3 Bed, 4 Bed & 6 Bed Houses, 1 primary School provides space heating, hot water and electricity. The scheme includes the use of 2 No. 210KWe Nedalo Gas CHP units integrated with boiler systems in the energy centre. The units are currently connected to the local electrical distribution system and the scheme supplies the electrical distribution infrastructure for electrical supply to all dwellings and public buildings via a private wired network. Waltham Forest Energy Services Ltd (now Thames Energy Ltd were selected as the private sector partner and an energy supply and management agreement was signed with the Council in August 1999 for a 10 year period. Works on site commenced in Jan 2001 and has been completed in 4 phases to minimise disruption to the residents. The business plan projected a 4.75 year payback period. Estimated annual environmental benefits were 1011 Tonnes of Carbon Dioxide displaced and 3099717MJ reduction in primary energy sources Contact person: Mr Denis Thomas Thames Energy Ltd 18 Hemmells Basildon, Essex, U K SS 15 6ED Tel: 01268 411122 Fax: 01268 4111350


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WOKING: Woking Borough Council already holds claim to being the most energy efficient council in the UK and is also the only Local Authority to supply customers with electricity on private wire combined heat and power (CHP) networks. In 1999, The Council set up an Energy Service Company to capitalise on its intellectual property in small scale community CHP to enable large scale district energy/CHP schemes to be implemented, primarily with private finance. Thameswey Limited - the Energy Services Company - is wholly owned by Woking Borough Council’s Energy and Environmental Services. The company was established in February 1999

• to promote energy efficiency, energy conservation and environmental objectives by providing energy and/or environmental services;

• to develop and implement technologies for the production and supply of energy;

• to produce and supply energy (and any related by products) in all its forms;

• to acquire and hold interests in the share capital or loan capital of any company or corporation and in particular in companies engaged in energy and/or the environmental business;

• to provide financial, managerial and administrative advice, services and assistance;

• to make facilities and services available for its customers and customers of companies in which it holds an interest.

Thameswey Limited has entered into an agreement with Woking Borough Council to act as its contractor to invest in combined heat and power plant (energy stations) to sell heat and power in an environmentally friendly way with a view to improving the environment within the Council’s area. In May 2000, Thameswey Limited invested in its joint venture company, Thameswey Energy Limited, to finance the first energy station in Woking Town Centre. Thameswey Limited will make additional investments in Thameswey Energy Limited to finance further energy stations, the next station is planned for Woking Park.

Contact person:

The Energy Services Manager Woking Borough Council, Civic Offices Gloucester Square Woking, Surrey GU21 1YL Tel: 00 44 1483 755855


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4.2.3 Public real estate and housing companies

FRENCH HOUSING COMPANIES For several years, OPAC 38, who manages nearly 22 000 dwellings in the county of Isère, is willing to implement modern actions both on the social side (core of its mission as social housing company) and on the environmental aspect (energy expenses management, development of renewable energy sources).

The general idea of the energy policy of OPAC 38 is to improve the quality of service for the customers (the renters), without increasing the costs (that is the sum of the rent and of the service and maintenance charges).

There is a specific department within OPAC 38 for energy, with two engineers. The existence of this department is consistent with the political will to implement a sustainable development policy, which started with the energy policy (at the beginning, with one engineer).

These operating and maintenance contracts are implemented for all the collective central heating systems. If sanitary hot water is heated with the collective boiler, it is also included in the contract. They include:

• Energy procurement • Operating and maintenance • Bigger maintenance and renewing: it is an annually fixed amount that allow to

replace heating systems parts when they are out of order, and works as an insurance (the ESCO must implement all the necessary repairs).

Instalments occur in March, May, July, September, November for 15 % of the total amount, and the final invoice includes the results of operating and review of prices. If the annual (based on civil year) consumption, after climatic correction is over the target, OPAC 38 pays only 1/3 of the over cost. If it is under the target, OPAC 38 gets 2/3 of the difference.

The contract is 10 years long, subdivided in lots, corresponding to geographical areas.

For year 2004, considering the climatic conditions, the target value was an energy consumption of 101.8 GWh for 8905 dwellings. The actual value has been 97.8 GWh. This represents 3.77 M€ for energy procurement, and 0,56 M€ for operating and maintenance. The financial savings have reached an amount of 58 k€. Customer contact: OPAC 38 Laurent BOGIRAUD Responsible of energy department 47, avenue Marie Reynoard - BP 2549 38 035 GRENOBLE Cedex 2 Tel: 04 76 20 51 45 Fax: 04 76 20 51 47 [email protected] - www.opac38.fr


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4.2.4 Public schools and leisure premises

A. FINNISH SPORT AND LEISURE PREMISES IMPIVAARA (Swimming hall): Impivaara swimming hall was built in 1975. The building volume is 50900 m3. The contract between town and service provider started under SPARTRIM contract. This contract has same features as EPC contract, but is service provider trade name for such services. The five year contract started in 1.9.1999 and ended 1.9.2004. The initial contract was followed by three year EPC contract, where no new investments were made but the responsibility of the energy management continued. This contract was one of the first contracts for both parties. No competition was arranged but the contact was awarded after negotiations. The supplier activity was key to the contract. The contract included savings target both for district heat and electricity. The savings target for heat was 1000 MWh/a and for electricity 400 MWh/a. The reference consumption was the average consumption of heat and electricity from the previous five years (1993-1998). The reference for district heat was 5241,5 MWh/a and for electricity 2156,3 MWh/a. The main investments were rebuilt of building automation, frequency converters for fans and pumps and replacement of heat recovery units. The contract value was € 209 000 and the investment was financed by the service provider. Customer contact: Juhani Korte Planning engineer Turku Talotoim Linnankatu 39, 20100 Turkui tel +35822624390 Service provider contact: Timo Jurveli Account manager YIT Kiinteistötekniikka Oy PL 58, Kalevantie 35, 20521 Turkul, +358503901168


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VARISSUO (Ice hockey arena): Varissuo Icehockey and parking hall is an underground structure, which is used as parking hall. Part of cave is equipped for ice hockey stadium for junior games and the facility has also a coffee shop. The cave will serve as emergency shelter if needed. For emergency purposes it has independent ventilation etc. systems, which were not touched in this work. The hall has volume of 114900 m3. The building area is 17400 m2. The facility was completed during 1983. The ice hockey hall temperature is +10 C and other rooms according to normal building standards. In the hall heat is needed for space heating, hot tab water and for keeping the ice subdrainage working and for melting ice (snow) which comes from ice maintenance. Benchmarking with other halls showed high relative energy consumption. Turku municipality had already gained experience from EPC contracting and was willing to continue on that line. Turku negotiated with some candidates and selected YIT as EPC partner for this case. The contract was signed during 2003 and the investment was completed on the same year. The total investment was € 198000, € 39600 grant was admitted and the contract value was € 158400. Associated O&M contract was also signed. The agreed target was to recover 1134 MWh heat from chiller condensers and from ventilation exhaust air. The saved heat is used for keeping the subdrainage free of ice, melting the snow collected from the ice surface and for tab water preheating. During the first contract year the savings were 410 MWh when the hall was in use for 3 months after the modification. Year 2004 the hall was in use year round, which is more than typical year. 2004 savings were 2958 MWh. The target building automation is connected to YIT control room where they monitor continuously the operations and energy consumption of the facility. Reports are available at any time and further improvements can be planned based on accurate measured data. Customer contact: Juhani Korte Planning engineer Turku Talotoimi Linnankatu 39, 20100 Turkui tel +35822624390 Service provider contact: Timo Jurveli Account manager YIT Kiinteistötekniikka Oy PL 58, Kalevantie 35, 20521 Turkul tel +358503901168


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B. FRENCH SCHOOLS In the framework of the devolution laws, the 22 French Regions became in charge of investment spending for the construction of new high schools, as well as spending relating to the major maintenance of existing high schools. In addition, the Region’s were now responsible for the operating expenditure necessary to cover the material operating costs of the high schools (energy, water, major and minor maintenance, etc.). In the case of Rhône-Alpes Region, this transfer involved 275 high schools. Rhône-Alpes Region decided to pursue a vigorous policy of investment in energy saving. The objective of the policy of investment in energy saving was to set up sufficient material conditions necessary for the high schools to fulfil their education service, but also minimise the costs of this service. The internal preparation was about one year. Since politicians and policy makers were already aware of the necessity of an energy saving program, no special information process was needed. The high school head and bursar who are responsible for operation and maintenance of the installation were involved from the very beginning. To begin with, systematic diagnostic studies of the entire property holding made it possible to select the investment programmes. After the various existing financing solutions were studied, the third-party financing format was selected. This third-party investment format was far from widespread in France. It was proposed only by SINERG, a subsidiary of the Caisse des Dépôts et Consignations, specialised in financing programmes linked with energy saving created in 1983. The principal difficulty lay in meeting the Public Procurement Code. Customer contact: Rhônalpénergie Environnement (for the Rhône-Alpes Region), 10 rue des Archers - 69002 Lyon + 33 (0)4 78 37 29 14 [email protected] Service provider contacts: Fabrice BOUZEREAU Project Director ADELIS 74 Rue Maurice Flandin - 69003 LYON + 33 (0)4 72 13 03 23 [email protected] Eric CORNIER Operation manager EOC France SINERG 74 Rue Maurice Flandin - 69003 LYON +33 (0)4 72 13 03 23 [email protected]


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4.2.5 Industries

AUSTRIAN INDUSTRIES Rosenbauer International AG is one of the worlds' largest producers of fire engines and fire protection equipment. The customers of the company are fire departments in the whole world. The branch office in Leonding, Upper Austria is the head quarter and sales division of Rosenbauer Österreich which is a 100 % subsidiary of Rosenbauer International AG. As saving energy was always a main topic for the company, Rosenbauer started in the year 2003 an ECP/TPF project with the aim to optimise the energy costs of the branch office in Leonding. In Leonding the company has 21,300 m² production and stock areas and 7,500 m² office and sales areas. The gas and electricity consumption was split up in 70 % for heating and 30 % for warm water and the paint shop. With the implementation of heat recovery installations, remediation of the hydraulic systems, optimal integration of the CHP, sealing of the windows and training of the employees a carbon dioxide reduction of about 309 tons per year and energy savings of 1,463,000 kWh per year are reached. That is a reduction of about 53,500 Euros energy costs per year. The duration of the contract is 6.5 years. One of the general ambitions for the project was that with the ECP/TPF project the company gets professional support service from the energy service company. Rosenbauer wanted to address with the energy service cooperation all the areas of the company where it was possible to save costs for energy. It was no problem to anchor the project in the company and get the accordance of all the persons who are entitled to make the decisions in this case or work in the company. Rosenbauer involved right from the beginning the whole personnel into the project and therefore it was insured that the staff identified itself with the project. As the expected targets are reached so far, like the professional implementation of the project by the energy service company and the first results are positive, Rosenbauer is very satisfied with the actual situation. And it is one of the first companies of this size and kind that made such a project. Customer contact: Karl Widmann Rosenbauer International AG Paschinger Straße 90, A-4060 Leonding, +43 (0)732/6794-354, [email protected] Service provider contact: Horst Lebschy Ing. Axima Gebäudetechnik GmbH, Niederlassung Traun/Linz Rubensstraße 40, A-4050 Traun, +43 (0) 732/371294-16, [email protected]


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5. Results of carried out feasibility studies In order to prepare the ground and to study the real context feasibility studies were carried out (two per partner). They have identified on the ground the specific problems and solutions for implementing energy services. Energy performance contracting for example is not possible in all the involved countries, so the design needs to be adapted to the specific framework conditions. In a second step the elaboration of adapted specifications have assisted the local authorities for their tenders to implement energy services, allowing having the best offer by ESCOs. In preparation of the feasibility studies the partner KEA has, with the input of the partner’s, produced a feasibility study guideline (see next chapter). Short summaries in English presenting the feasibility studies have been produced by the partners (see annexe). A synthesis can be found in chapter 5.2.

In addition the results of these feasibility studies and the guideline are available on the PU-BENEFS web portal in an English summary version. More detailed results of the feasibility studies can be found on the partner web pages.

5.1 Guidelines for feasibility studies of energy efficiency services

Introduction The successful implementation of energy service projects is often hindered by some items arising from the project development: Most of public authorities have no detailed information about the energy costs in their building stock. Few public authorities run a professional buildings management, and have only little information about the technical, organisational and low-investment weak points in their buildings Experience shows that running a successful project requires useful knowledge about poor energy performance and costs. In earlier projects, the public authority allocated the initial analysis/feasibility study completely to the ESCOs. This has undermined the position of the authorities during the purchasing and negotiation process. As long as only the ESCO has the data on the needs for action, the ESCO controls the process. The result has often been the cause of problems; e.g. in many projects severe interface problems occurred. Measures often only concentrated on areas where the energy consumption could be optimised or improved by replacing parts of the installation. These have however encouraged public authorities to replace non- energy saving part of the installations. Projects developed in the last two or three years have learned from that and encouraged public authorities to prepare energy saving projects with their own feasibility study, analyzing the most typical weak points in public buildings´ installations. This guideline for feasibility studies should therefore be a manual for the preparation of the project in that way. It gives some essential project information which has to be tailored to fit the national context and provides a checklist with some typical items to be cleared at the very start of the project. The feasibility study is only an initial analysis with a small cost budget. So it is up to the expert doing the study, which working sheets is used for the work, and which data is finally collected.


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5.1.1 Implementation of energy service and energy performance contracting projects

The procedure for carrying out energy service and energy performance contracting projects normally follows at least five steps and three decision points, in which the public authority may influence the progress and the scope of the project.

STEP 1: PROJECT DEVELOPMENT This step normally takes place within the organisation or the public authority and is mainly opinion forming. Prompted by lack of finance, technical expertise, staff capacity and by the elected representatives, the public authorities leave their “normal” way of investing in their buildings and energy equipments and start to analyze alternative ways. Energy performance contracting (EPC) and energy services (ES) have become more and more common in some European countries and information based on practical experience, such as guidelines, project reports are already available. In regard to the more or less complicated proceedings, from the initial idea to the implementation of such a project, a market for consultancies has been developed, in which some design companies and energy agencies offer specific advice. On the other side of the market, a number of local and global players offer their products such as EPC and ES. The EU guidelines for public procurement normally envisages a competitive contracting process with at least three competitors. This discourages public authorities in nearly all cases to go into direct negotiations with service companies. The few cases in which the direct placement of an order is legal are very specific and do not play any important role in this kind of project. Some authorities, when attempting to avoid the tendering procedure, have found that this can be a painful experience with penalties (mostly financial restrictions) resulting from their mistake.

1 Project

Development

2 Feasibility

Study

3 Purchasing

Process

4 Implemen-

tation

5 Contract period

Decision Point 1

Decision Point 2

Decision Point 3

Overview on public Step- by- step energy service project


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Target of step 1

• To gather and edit useful information about EPC and ES • To make transparent the market and purchase mechanism • To make transparent the market partners and their services • To formulate the targets (technical, operational and financial) which should be

achieved by the project • To prepare the authorities and their boards for the decision to kick-off the second step

of the proceeding i.e. the feasibility study.

Market partners involved and their role • Public bodies and Councils: initial function (several projects have been initiated by

members of the Councils and not by the Authorities themselves) and decision • Public authorities: preparation of the decision making process in the Council • Consultancies: edition and dissemination of information for the public authorities • ESCOs: information on reference projects, initial function, which does not normally

lead to mandates

Decision Point 1 Kick- off for step 2

STEP 2: FEASIBILITY STUDY (FS) In this step a preliminary (initial) analysis is carried out among “representative” parts of the building stock. The main aim is to evaluate if the ideas and ambitions formulated in step 1, can realistically be achieved based on previously identified saving potentials and the estimated costs.

Target of step 2 • Initial analysis of typical weak points of the main energy consumers in the building

stock • Generation of the base-line data (energy consumption, energy prices, energy costs,

maintenance costs etc.) • Generation of a “to-do-list” with measures and interface definitions for each weak

point • first evaluation of the estimated costs and savings for each measure • Arranging the measures into categories: “technical” “very important”, “highly

economical”, “nice to have”. • Prepare decision of which energy service is the most suitable (ES, EPC, others) for

the portfolio of measures • Identification of the next steps for the procurement of the service chosen and the

related costs for these steps • Indication as to whether the public authority is interested in proceeding further with

the purchasing process (step 3) • Decision in the public council to initiate the purchasing process


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Decision Point 2 • Determination of the form of energy service and the buildings in which it should be

carried out • Initiation of the purchasing process • Decision prepared by the public authority and their consultancy, decision normally

made within the authority (minor projects) or within the public council

STEP 3: PURCHASING PROCESS In regard to the European Public Procurement Act the public authority has to run a competitive purchasing proceeding, which is more or less standardized and specified in each European country.

Target of step 3 Step 3 normally consists of several parts which have to be carried out by the authority, assisted by an experienced consultant:

• Preparation of all necessary papers for the prequalification and the tender process, such as the contract, baseline data, form sheets

• Running the prequalification before sending out formal request for tenders. The process is necessary in order to ensure that the public body in the later stages is entitled to use the more flexible Selective or Negotiated procedures. When 3-5 potential ESCOs are pre-qualified they receive the request for tender containing basically four evaluation criteria.

• the level and quality of references, experiences and the proposed co-operation structures

• the type and conditions of conceptual, financial and contractual structures • The calculated level of energy to cost savings, it’s calculation basis, and the saving

guarantee structures • the quality and quantity of measures to be carried out by the ESCO

and a more or less detailed and standardized contract and other form sheets

• Running the evaluation and negotiation and fine tuning of the ESCO’s offer. However, even after appointing one ESCO for the analysis and development contract, a 2-stage process is in use, meaning that it’s the results from the detailed analysis and development that determinate if the customer finally says yes.

• Preparation of the decision to appoint based on decision making matrix taking into consideration the evaluation criteria

• Preparation of the next step which is often the fine (detailed) analysis to be done by the ESCO


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Decision Point 3 Appointment of the ESCO which has had the best offer with two feasible consequences:

• the mandate to start the planning, building and operations proceedings for the negotiated measures (1 step process). Since the tendering process seldom gives the opportunity for detailed studies or technical coordination a joint implementation strategy between tenderer and the customer, a more detailed analysis and project development is required to give the customer comprehensive decision making material. To avoid unnecessary risks for the tenderer and to keep the decision making material as detailed as possible, the “two- step- process” is practised, particularly in technical complex projects.

• the “two- step- proceeding” foresees that the most suitable tenderer is awarded the

mandate to start a detailed analysis and planning process in close adjustment with the public authorities, to calculate the measures again and to confirm or improve the economic criteria of the step before (2 step process). Solution b) normally ensures that the final decision about signing the implementation contract is not before the presentation of the results of the detailed analysis.

Prequalification - selection at least 3 ESCOs

One step process Two step process

Prequalification - selection at least 3 ESCOs

Call for tenders, Evaluation, Negotiation Results: 1 Step ESC: measures, guaranteed savings, contract period

Reward: final implementation contract Based on the results of the first step

Implementation

Call for tenders, Evaluation, Negotiation Results: 1 Step ESC: measures, guaranteed savings, contract period

Reward: fine analysis/ planning contract with target to confirm the results from the first step

If confirmed: normally final implementation contract is signed If failed: end of the process/negotiation with the second best tenderer


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STEP 4 : IMPLEMENTATION This step is quite comparable to the normal self-financing measures. To optimize the results, the ESCO’s planning and implementation process should be linked very closely with the public authority. Depending on the contract model chosen, often the ownership of the installation is transferred to the public authority. With regard to possible risks resulting from bankruptcy of the ESCO, this may be a viable way to avoid conflicts with the ESCO´s creditors. Before finishing the implementation stage, the ESCO and the customer must agree on the technical and administrative equipment and routines necessary for the follow up and guarantee phase.

Targets of Step 4 • Installation of the energy efficiency measures fixed in step 1 or step 2 • Successful functional control by the public authority • Final definition of interface between ESCO and buildings installations • Start of the contract period

STEP 5 : CONTRACT PERIOD This phase contains the ongoing follow up and reporting work related to the savings guarantees. The ESCO normally report actual energy consumption versus guaranteed consumption and savings on an monthly basis. Every third month a formal follow up meeting is held, and once a year the contractual and financial conditions are addressed and any potential over or under performance is identified and dealt with. In addition, the duties of both parties resulting from the contract should now be in operation. This includes the periodic maintenance, the quick response on failures, the guarantee repair works etc. 5.1.2 Helpful framework conditions Especially in public authority contracting and service projects, certain problems may not be forecast in the long term plans. The needs occur “suddenly”, when e.g. a boiler break down has just happened or seems to be unavoidable in the next heating period. Mid- and long term planning strategy is considered to be the best way to proceed. Performance data can be gained from a frequently updated “weak” point list. This can be generated within a facility management or an energy management project. The monthly energy consumption report often provides a lot of helpful information about the weak points and problems occurring in the operation of the existing installations. This can be used in the preparation and implementation of energy service and EPC projects. It should be noted that well operated energy management projects often generate significant energy saving benefits with very little investment. The gains are virtually cost free.


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Contracting: Step-by- Step Project Development

•

Energy Management= 10- 15% Savings with small-budget- investment

Energy Management= 10- 15% Savings with small-budget- investment

Energy- Audit for Buildings with high Saving-Potential-Energy concept

-Investment + Finance Plan

Energy- Audit for Buildings with high Saving-Potential-Energy concept

-Investment + Finance Plan

Bench-marks

Make or Buy Analysis based on annual Full-Costs

High Energy Prices

Own

Investment

Energy-

Contracting Performance Contracting

5.1.3 How to choose buildings - first selection (Step 1: Project

Development) At the start of the project with very little information and possibly no first hand knowledge a first estimate can help to analyze the buildings stock very quickly whether EPC or other energy service could be employed. The basic criteria are the energy consumption and costs for each building. Often only costs for heating and electricity are available. The consumption can be calculated with average energy prices. If available, without extensive survey, the heated area (m²) should be estimated and an initial benchmark for the electricity and heating consumption calculated. Quick check for building pools:

• Target: Primary selection of viable buildings • Data needed: energy consumption, heated area (m², if available) • Criteria for ESC: Energy costs higher than 50.000 €/a (electricity and heating, see

below) and benchmark obviously higher than average specific energy consumption • Criteria for Energy Service Contracting: Energy costs higher than 20 - 30.000 € /a,

since costs for the purchasing process and the project management may not be in a reasonable relationship to the energy costs per year.

To implement an EPC project, the required investment, and the total present value of annual costs as well as the transaction- costs which occur in the purchasing process, have to be recovered by the energy and maintenance cost savings. The first item taken into account is the energy costs. In Germany EPC projects have been realized in objects with energy costs of at least 50.000 €/a. But it should be noted that this is certainly close to the minimal cost baseline, where EPC projects still may make sense.


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Example

• Building: High school • Energy costs: 100.000 €/a • Equipment costs: boiler, pumps, lighting system overall estimated: 50.000 € • EPC costs excluding investment, including financing, O&M, maintenance and

transaction costs: estimated: 60.000 € • Total costs: 110.000 € Average savings in EPC: 20%, 20.000 €/a • Simple Pay back time: < 7 years

5.1.4 Decision making process (Step 1: Project Development) Two main items have to be considered before starting a project, which make it important to have some relevant information about the public body and avoid mistakes and disputes:

• The individual purchasing regulations (see WP 2) may vary in regard to the type of public body. There is a difference between the regulations for e.g. a municipal utility and the municipal authority.

• Also the decision making process may be different for different public bodies e.g. state authorities and municipal authorities

A checklist may help to shape the profile of the public authority.

Profile of the public authority Short review on the main data of the client

• Which kind of public body is it? Municipal utility, municipal authority, county authority, etc.

• Main objectives of the client • Success achieved so far in climate protection and energy saving • Information about different uses of the operated buildings stock • What were the reasons for instigating the feasibility study e.g. lack of own financial

opportunities To get a better understanding on the clients’ decision making process, the description of the process and the personnel involved may be helpful.

• Decision making process for the feasibility study • Which persons are involved in which part of the process? • Opinion of the staff involved in the process • Which commissions were needed for final decision • What were the criteria for choosing the nominated buildings? • Who was involved? • Criteria: benchmarks, short on-site audit • What was learned from the data sampling process? • Who was involved and what data was most difficult to gain? What were the problems

encountered.


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5.1.5 Feasibility study - Objectives Target of the feasibility study in the context of the PU-BENEFS project is at least to form a platform for decision-making on energy-saving measures and the way to implement them. The following items should therefore be considered: Identification of measures The feasibility study provides information for the building owner as well as for the contractor. Evaluation of technical weak points and possible improvements in the technical installation of the building Evaluation of the management and operation of the facilities including maintenance services Way of implementation The feasibility study also gives information about the method of implementing the measures identified, which could be performed by the owner, by contracting or operational services. The feasibility study may be help to decide if a performance contracting or energy service contracting organisation would be capable. Purchasing instrument In some countries, e.g. in Germany, specifications are required for the purchasing procedure. In owner controlled investment projects a very detailed specification, which gives clear information about the quantity and quality of each purchased item should be produced, which will enable the contractor to submit prices. This may often be the standard for purchasing operating and maintenance services. The procurement of energy service contracts often requires some basic data about the quantity and quality of the energy needed and about further services which are required, e.g. maintenance service. Performance contracting projects often do not require detailed specifications of the installation and equipment. E.g. in Germany purchasing regulations for performance contracting projects often only require basic information about the buildings (address and baseline for energy consumption). The contractor has to define his data and the guaranteed savings on his own. A detailed specification of the existing data does not often exist. What seems to be simple often turns out to be the opposite, when evaluating bids, especially when the anticipated work is next on the agenda. Often, the owner of the public building has insufficient basic information about the facilities, especially the possible energy saving measures. As good practice projects show, the first step for the building owner should be an energy audit, such as the feasibility study. There are apparent advantages: the contractor benefit is that he has an indication of the measures the public authority is aiming for. At least, the feasibility study could be used as an agenda for the purchasing procedure, which leads to a remarkable simplification of the bidding process. The feasibility study is also the data platform for the interface between the data collated by the contractor and the outcome expected by the building owner, which often has turned out to be very difficult without reliable data basis.


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Last but not least, public authorities require an estimate of the competitiveness of the bids in comparison to their own performance. The results of the feasibility study, especially the economic evaluation of the measures can provide that information. To fulfil the function of a purchasing instrument, the feasibility study should give information about:

• weak points and measures to be studied by the contractor in his bid • examination of the economic efficiency of the proposed measures • clear interface definition for the technical facilities to be replaced

5.1.6 Feasibility study - Procedure To meet the client’s objectives, the feasibility study should be carried out in at least three steps. The results and the incremental database of each step allows a more precise procedure and improved targeting of the feasibility study contents. This procedure also supports the input of the facilities owners experience and expectations.

STEP 1: FEASIBILITY STUDY - ASCERTAINMENT AND ASSESSMENT ON THE CURRENT SITUATION To prepare an energy efficiency project, an initial step should be to gather some basic information. The main target in the first step is evaluation: generate the energy consumption, cost and price baseline measure the energy consumption, if this was not obtained during the “Project Development” spot the technical, organisational weak points in the building, its installation and the operation conditions, on which the action list for the project will be founded. The following main tasks should be managed in this step. To organize the data collection and the evaluation of the technical equipment, the questionnaire- worksheets in the annex may be useful (see brackets). Examination of the sufficiency of the available data: are they based on own data collections, bills, planning schemes or other data? Organisational data: the data needed to stay in contact with the operating personnel, including the design and the executive level (A4) Collection of the consumption and other costs data: the consumption data, the maintenance costs should be based on the energy consumption bills, Collection of the technical data of the building and its energy infrastructure: the data of the technical equipment normally should be collected during a site visit (B – D) Baseline data: energy consumption, energy price and annual cost inventory: the baseline data has to be prepared (B 3): all consumption and cost data normally represent one year normally the average of the last two or three years or the last year is used for the consumption baseline the heating consumption (correctly without the hot water generation, if measurable) should be adjusted to the average annual heating days (degree days) special circumstances affecting the energy consumption should be allowed for.


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Basic information on the buildings utilization (B2 ff): The consumption baseline normally corresponds to the buildings´ utilization in the same year. The utilization can be specified in functions (hospital with laundry), areas (floor, office…) and measured in lecture hours/a (schools, universities etc.), in visitors (swimming pools) and in occupation days (e.g.: per bed in hospitals). In some building types, the utilization time or occupation rate has a stronger impact (e.g. swimming pools) on the consumption than in others. Comparison with energy consumption benchmarks (B5): (related to global and/or specific energy consumption) Auditing the energy infrastructure: as generation, conversion, distribution and storage (D1 to D5) The evaluation is based on the results of the site visit (overall condition, year of construction, technical standard installed), on current data (e.g. typical energy efficiency for hot water boilers built in 1980-1990 and for a present day one) Auditing the main energy consumers: in the building as lighting system, engines, fans, chilling systems, boilers, pumps and hot-water storage (all in D 5-12) , thermal insulation of roof, window, walls (C). The evaluation is based on the results of the site visit (overall condition, year of construction, technical standard installed), on current data (W/m² lighting power installed in energy efficient lighting systems in offices) Highlighting weak points and flaws: In most chapters some typical weak points are listed and may be completed by particular experience Simplified Energy balance sheet for heating and electricity (D13) Definition of the possible improvements and the scale of the next step

Annex : Questionnaire /Working sheets The main objective of these work sheets is to give the energy consultant a guideline for the data sampling, benchmarking and evaluation within the feasibility study. In our KEA- experience, a questionnaire with some explanatory comments is the most practical working tool for a feasibility study. It may be used as an inventory check list for the necessary data and for the examination of the standard energy saving measures which should be considered as a minimum. Spread sheets also can be used for documentation during the site visit. Each chapter is concluded with a sheet, in which the results of the economic evaluation of the each energy saving measure should be put in writing. At the end of the questionnaire, the economically most viable measures are brought together. The questionnaire gives no guideline for the calculation of saving measures but requires that the energy consultant gives details of his calculations. The data in Chapters A and B may be essential for the baseline energy consumption, costs and prices which will be used by the contractor in the bidding procedure. In the following Chapters, especially in D, data for the evaluation of the technical equipment is required. Beside essential basic information, some of the spread sheets require very detailed data, e.g. D4, where the relationship between outside and heating media temperature should be examined. This is because it has been found that most control systems are not properly optimized or working reliably. It would be the energy consultants’ decision, which of the spread sheets are used for data sampling and the evaluation of the facilities.


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STEP 2: PLANNING AND ASSESSMENT OF MEASURES There is no rule as to whether this step should be completed by the public authority. Experience has shown, that projects which are technically complex or with a specific individual solution (e.g. the decision of a municipality to connect most of the public buildings to wood chip boilers) which may stretch the ESCOs´ financial or technical capacities within a tendering proceeding should be done by the public authority. If it is foreseeable, that the weak points found in step 1 do not implicate high technical complexity this second step should not be done by the customer.

Target of this step: Analyzing and discussing the technical and economic feasibility of one or several specific and complex technical solutions

Tasks to be done in this step: • Definition and evaluation of the criteria affecting the decision making process for the

measures: this will be the economic calculation, the technical practicability, the CO2- and primary energy balance etc.

• Definition of the criteria needed to evaluate the outsourcing potential of the measures: which normally means an evaluation of the interface definitions and the quality of the operating personal

• Proposals for non- technical energy saving measures: if not yet done in an energy management project these measures should be listed and discussed.

• Proposals for efficient energy use as improving the specific efficiency and utilization ratio, energy recovery and avoidance of unnecessary energy consumption by optimizing the time schedules of the energy supply and distribution

• Proposals for the energy supply including rational energy use with cogeneration plants and the use of renewable energy

• Design of the main components • Examination with respect to the required investment, the economic efficiency and

other criteria affecting the decision making process • Design of a decision making matrix for the measures and the possibility for the

outsourcing of these measures

Energy supply concept Besides the “normal” refurbishment of an old boiler by a new one, other supply concepts should be considered. The design, calculation and the results are very much affected by the local frame conditions. In the questionnaire, in the first step only are the proposals for alternative supply concepts shown.

• Heating and hot water supply: • CHP • Tri- generation with chilling, heating and power production • Wood boilers • Heat pumps • Geothermal energy • Thermal solar energy


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Energy consumption The energy supply concept should be calculated with simulation software, based on daily load curves for electricity, heating and chilling consumption. For the first estimation in the feasibility study, such a simulation tool is not required. The following scheme simplifies the calculation procedure but also limits the accuracy of the results (within an acceptable range).

Energy consumption data The monthly energy consumption for electricity, heating and chilling has to be obtained from the monthly billing or other reliable energy management data.

Duration curve For the design of the duration curve the load curve of the hourly load figures is essential. If not available, the load curve has to be constructed based on specific calculations. The calculations normally show the correlation between the heating load and the ambient temperature as well as the process heating load, which is in little correlation to ambient temperatures. The graphic representation of the load curve shows how long the load occurs during the year. The area beneath the function corresponds to the quantity of energy consumed.

Design The design of the applications (CHP, wood boilers, heat pumps) is normally based on a set of parameters:

• the annual utilisation time should be high enough (e.g.: CHP > 5000 h/a full load hours) to spread the higher investment and higher annual costs for interest and pay back on a competitive level,

• wood chip boilers can normally be operated within a range of 30-100% efficiency whereas CHP and heat pumps need to be split to avoid inefficient part load operations

• annual costs from the refurbishment of a conventional boiler would be considerably less

• the price for the alternative fuel should be taken into account, this would include natural gas, oil, wood chips and electricity, including taxes and permits.

The size of the application can be estimated by the duration curve and the minimum operation time per year expected.

Economic evaluation The investment and annual cost savings of energy efficiency measures should be compatible within a static payback method.

• To prepare information about the EPC feasibility, the calculation should be kept quite similar to ESCO. Investment costs should include the total amount of annual costs for interest rates. O&M refurbishment will occur in this contract period. The total costs/total savings is initially now known.

• Using higher efficiency fuels would result in cost savings. • The maintenance and repair costs for old appliances will be high • CHP analysis should consider saved fuel costs for heating and the value of the

generated electric power.


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When comparing several solutions in energy service contracting projects, annual costs should be drawn up, consisting of:

• Investments including engineering costs should be amortised over the life time period of 15 to 20 years

• Annual maintenance and refurbishment costs can be estimated to be 2-3% of investment costs for heating units. CHP’s are operated with fixed maintenance costs.

• Variable tax rates apply in each country for CHPs so an average energy efficiency ratio is needed

• O&M costs i.e. based on weekly operating hours • CHP: calculation of electricity • Other costs i.e. monthly rates for boiler room • Consideration should be given to the CO2 emissions/kWh and energy efficiency

factor

Overview Measures, Results and Feasibility An estimated feasibility of performance within the contract projects is given. Measures are given a rating of importance which is dependent upon their static pay back time. Development and evaluation should be priority rated whilst carrying out performance contracting bids. The criteria used to measure or rate the performance contracting feasibility should be the pay back time. Rating criteria for the performance contracting feasibility

Weighing in % Remarks

Static pay back time Sum 100% It should also be explained how the criteria for the importance of a measure was set: importance can be very high if a measure is economically very attractive and/or the measure is based on technical reasons e.g. to avoid contemporary break-downs or safety risks.


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The reasons for the rating of low priority could be due to a long pay back time which only saves a small amount of energy.

Rating criteria for the importance of the measure

Weighting in % Remarks

Simple pay back time Technical absolutely necessary

Important consumer SUM 100%

Measure Investment Savings Annual Energy

and other cost

Pay back time

(static)

Importance Feasibility for PC-projects

STEP 3: DEVELOPMENT OF OVERALL CONCEPT

The targets of this step are: assessment and selection measures of the overall concept based on those with the most promising outcomes in the decision making matrix preparation of the final consultation report with the key results of each measure of the proposed concept

Tasks to be done in this step: Decision making matrix After collating a priority list of proposed investments, both economic and technical, the method of proceeding with investment will be ascertained:

• third party financing • direct investment by property owner, local authorities • direct investment by energy service company • direct investment by performance contracting company


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Which energy consumption fields to be treated by which energy services Basically, the energy consumption fields which are to be dealt with by energy services have to be chosen within the feasibility study. This preliminary analysis should be done before a detailed project analysis and is based on the chapters A to E of this guideline which gives basic information about the weak points in all consumption fields. The energy consumption benchmark helps to focus mainly on energy consumption fields which are above average levels compared to other buildings using the same basic pattern. The condition of the installed technical equipment must be examined. From this, information about the technical requirements for reinvestment may be gained. After having a closer look at the technical and energy efficiency deficiencies of the existing consumption structure, the next step will be to find technical solutions to improve the situation. This leads to a decision making matrix as shown in F giving information about the different technical measures and their economic effects. Another criteria to complete the decision making process is the technical need, resulting from obsolete installations, possibly resulting from a lack of maintenance or routine servicing. As experience in the last years in Europe has shown, some of the energy services are more or less restricted on specific measures.

• Third party financing may provide the capital required for energy efficient measures throughout all energy consuming installations. The utilisation of third party financing is mostly in conjunction with energy supply or energy performance contracts.

• Energy Management Projects (EMP) targets the energy and energy cost efficiency

in public buildings. One of the main hurdles to developing the energy efficiency potential in public buildings is the lack of efficient organisational structures to monitor efficient consumption and cost control.

The initial stage of resolution are the “soft measures” such as an organisational structure providing key figures e.g. the house keeper, the buildings manager and the users with clear responsibilities and duties. Another hurdle is the insufficient data about the utilisation of the building, the users’ behaviour, the technical equipment and the technical problems. To resolve this problem data should be collected, problems analysed and design studies produced of energy efficient measures. Energy Management Projects target the use of low capital cost measures. Experience has shown that EMP can produce energy savings of 10-15% with minimal investment. EMP should, therefore, be the first step to consider before implementing more expensive energy efficiency measures. Energy Management Projects may include the following options:

• Annual check of the energy purchasing conditions and contracts for electricity, gas, oil, water. The first indicators for the evaluation of the purchasing conditions may be the average price, which brings the total energy costs, (including load and consumptions costs) into relationship with the total consumption. Buildings with equivalent consumption figures should have comparable average prices.


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• Regular control of the energy consumption including both general metering and sub-metering systems. Recent development in EMP shows a rapidly growing number of sub-metering systems for electricity consumption and emerging markets for distance control systems. These systems consist of optical or electronic adapters which are installed within new or as retro fit on the existing gas and electricity meters, data loggers, modems or mobile phone applications allow efficient management of the energy consumption data of building pools.

Also studies on the daily measured load curve (gas, electricity and water) give helpful information about the consumption characteristics of the building in total or of large consumers. Decreasing prices for this equipment, starting now with about 500 € for three meters, and the experience, that good EMP provides 10 to 15% savings, and improved EMP (with DSM systems in operation) provide at least another 5-10%, enable Energy Managers to implement these systems even in buildings with energy costs < 10.000 €/a and give a potential payback of less than 1 year.

• Collection of the consumption data, and the area to prepare a practical benchmarking

system, based on specific electricity, heating and water consumption per m². These figures allow comparison to buildings with similar utilisation and allow early warning of excess specific consumption.

• Controlling of the operation parameters of the technical energy generation and

consumption equipment. Mostly the control systems for boiler and burner systems, hot water boilers, air conditioners and lighting systems need frequent control and adjustment to allow for the various hours that the building is utilised.

• Ongoing training and motivation of the technical operational staff, the housekeepers

and the building users to keep them aware of the energy efficiency targets. This may be structured within individual training sessions for the key operating personnel and monthly or quarterly information campaigns and sessions for the building users.

• Establishing a frequent controlling and reporting system, generating key data for

decision makers and users about the consumption, costs, eliminated inefficiencies and further steps in the building pool of the public authority. The report also includes the results and recommendations resulting from some economic studies about intensive energy efficiency may be in the pipeline.

Criteria for Energy Management and Supply Projects

• Lack of existing structure, e.g. no energy manager or other person for the energy consumption and cost control, poor maintenance and control installations, no suitably trained personnel

• No existing database for installation or it’s potential inefficiencies • No existing frequently (<12 months) energy consumption and cost reporting system • No existing consumption benchmarking system • EMP can be used as a tool for exploiting the non and small capital cost energy saving

potentials and should be considered before all further studies and contracting projects


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Energy supply services are usually based on a contract in which the end user (or beneficiary) pays for the energy supplied. Most energy supply services do not supply heating or chilling as such because of the difficulty of measuring the quantity of energy supplied. There are rare examples of energy supply services supplying lighting and chilling services. The contracts are usually for the provision of energy saving installations, for the benefit of the consumer. The investment should meet both the planning and equipment requirements of the buildings owner and the experience of the ESCO to plan and operate energy efficient installations. One of the main motivations for the design of an energy supply project is to implement the specific ESCO experience of energy efficient operation. The expectation of the client is that the ESCO would be able to implement more efficient energy and cost saving measures than the customer would be able to without expert assistance. To make sure that the ESCO experience leads to valuable benefit one of the measures may be to keep the technical specifications backing the project to a basic level such as a series of technical bullet points instead of detailed descriptions and planning. The working package of the ESCO may include the following options:

• the planning and design process starting on the basic requirements given in the technical specifications is completed by the ESCO,

• the financing of the investments and the services, • the purchasing and the installation of the material, the energy efficiency equipment,

which would consist mainly in the heating boiler systems, burners, the necessary control and monitoring installation. With improving standards of room temperatures an increasing number of energy supply projects target the chilling machinery. Depending on the needs and specifics of every single project, the installations are not restricted to the generation units of heating and chilling energy, but also on the distribution system, pumps, controlled system for distribution circuits. In new or totally refurbished buildings the complete distribution pipework and control systems including the radiators have been already part of the ESCO business.

The ESCO in most cases is completely responsible for the maintenance and refurbishment of the contracted installations. To ensure that energy efficiency is constantly high throughout the contract period, the ESCO controls the efficiency parameters and initiates maintenance and refurbishment measures for the generation and the main parts of the distribution system on his own, when efficiency ratio is decreasing. Besides that, the buildings owner wants to continue operation of the installations after the end of the contract period and sets up contractual requirements for the maintenance and refurbishment, including a functional description of the condition of the main parts of the installations at the end of the contract period.


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In some countries standards have been adopted for the maintenance and refurbishment of technical buildings installation systems which can be taken as a guideline to define duties and conditions.

• energy management, which supplies the customer with help to control his consumption figures and the compatibility of the energy prices

• overtaking the complete risk for the calculation figures, for the energy efficiency rate throughout the contract period

• the client is paying the energy he had consumed on a monthly or annual basis, depending on the consumption amounts and the calculation and billing strategy of the ESCO. The installed end energy is maintained and measured by the ESCO.

The contractual structure of the energy performance projects foresee the ESCO providing the energy efficiency investment, and recouped through the energy consumption in kWh or m³, actualized with a fixed or floating price per unit. Example: the installation of two regularly controlled motor-fans in a swimming pool air conditioning unit will have a pay-back period of 3 years. Facing the fact, that the unit is in bad shape, the ESCO will have to include the refurbishment of the whole unit, which will not lead to energy savings, and perhaps extend the payback (contract) period to possibly be 8 years. If this is acceptable to the client, the whole air conditioning unit will be refurbished. Besides the outsourcing of the non-energy saving part of the investment, the total refurbishment will be supporting a clear interface between the measures of the ESCO and the installations remaining with the client.

Criteria for energy performance projects:

• Measurable energy savings on the level of general measurements or on an efficient sub-metering system

• Mostly no restrictions for measures, as far as they are saving enough energy costs to pay back the investments and the cumulated annual costs in an acceptable contract period

• Pay back period for investments resulting from the amount of all investments, service costs throughout the contract period is not too long to be realizable in a performance contracting project. This may often be the case in medium and large scale buildings or in a buildings pool with an average total energy cost baseline of more than 50.000 €/a per building. Acceptable pay back periods in the public sector have been less than 15 years.


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5.2 Synthesis on results of feasibility studies in 6 countries

5.2.1 Background The successful implementation of energy service projects is often hindered by some items arising from the project development:

• Most of public authorities have no detailed information about - the energy costs in their building stock

• Few public authorities run a professional buildings - management, and have only little information about the - technical, organisational and low-investment weak points in - their buildings

Experience shows that running a successful project requires useful knowledge about poor energy performance and costs. In earlier projects, the public authority allocated the initial analysis/feasibility study completely to the ESCOs. This has undermined the position of the authorities during the purchasing and negotiation process. As long as only the ESCO has the data on the needs for action, the ESCO controls the process. The result has often been the cause of problems; e.g. in many projects severe interface problems occurred. Measures often only concentrated on areas where the energy consumption could be optimised or improved by replacing parts of the installation. These have however encouraged public authorities to replace non- energy saving part of the installations. Projects developed in the last two or three years have learned from that and encouraged public authorities to prepare energy saving projects with their own feasibility study, analyzing the most typical weak points in public buildings´ installations. In preparation of this step, a guideline for feasibility studies was designed by the participating partners. It should be a manual for the preparation of the project in that way. It gives some essential project information which has to be tailored to fit the national context and provides a checklist with some typical items to be cleared at the very start of the project. This guideline is downloadable on the following web site www.pubenefs.org. The feasibility study is only an initial analysis with a small cost budget. So it is up to the expert doing the study, which working sheets will be used for the work, and which data is finally collected. 5.2.2 Aims and ambitions with the feasibility studies Beside the common intention to clear out and figure out the weak points in the audited buildings, the motivation for the participating partners and the public administrations with setting up a feasibility study are quite different in the different countries. The reasons for that are the different market situations in the different countries as presented in the report: “Country specific conditions for Energy Performance Contracting”, which is available also on the web site www.pubenefs.org.


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In all countries public administration seems to be hardly to convince from setting up a feasibility study as a first step to the implementation of energy services. To help them in their decision making process, the feasibility study has to provide information which allow the partners and the administration

• to get an complete overview on their total energy consumption costs • to compare their specific consumption with average competitive buildings

based on energy performance indicators • to get a quick overview on the weak points • and solution pathways which allow them to continue quickly to design

specifications to start up a proceeding in view of carrying out organisational and technical energy saving and reconstruction measures

• the feasibility study should also evaluate the different pathways to

implementation such as EPC, financial services and supply contracting. • at last the feasibility study should be a guideline to evaluate the outcomes of a

tendering process for EPC. In most of the feasibility studies, the possibilities for the implementation of an ESC projects were evaluated. The measures and the estimated energy and maintenance cost savings found in the different studies made proposals for ESC projects quite easy. Most of the measures had static pay back periods on the investments in hard ware < 10 years. With some percentage foreseen for the “overhead” of ESC projects (financing, maintenance, operation costs) this still leads to attractive ESC contract periods. The PU- BENEFS partners were commissioned by the public administration to do the feasibility studies or to control and evaluate the outcomes of ESCO or other consultancies. It shows that “neutral” partners such as the PU- BENEFS partners seem to be very important to help to overcome the suspiciousness and awareness against EPC and other energy services in public administrations. This may be a very important key fact to be considered for the development of the ESC market in all partner countries. Also it seems to be very important to develop a very simple tool to carry out pre- studies in the partner countries which help to collect and evaluate some key figures (such as consumption performance benchmarks, total costs etc.) needed to estimate the possibility to carry out a feasibility study and to continue successfully with an ESC project.


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5.2.3 Overview on step-by- step process Some partners gave complete information on the step- by- step process. In some projects only a part of the process was needed to enhance some already existing structures. It shows that from the beginning of the acquisition until the signing of the contracts at least 18 months will pass by.

ICAEN AESS Public lighting/ hospital

KEA

Step Duration in mo

Working days partner

Duration in months

Working days partner

Duration in Work.Days Months partner

Acquisition 2 months

2 3 mo energy + maintenance budget data

3 d 3 months 3

Pool building

1 month

3 - public lighting - 1 month 2

First audit 1 month

3 1 mo: Audit of Equipment (light points / heating stations)

Light: 2 d Hosp. 5 d

1 month 5

Definition of project aims

3 months

10 5 d 2d/2d 0,5 months 2

F S Light: 1 mo Hospital: proposal discussion

15d/2d 1 month 10

Generation of Tendering papers

2 months

10 1 mo 15d/ 10d

1 month 2

Public call for application (EU-wide)

0,5 months

1 mo 3 d / 2d 1,5 months 1

Bidding process

2 months

1,5 mo 4d/ 1d 1 month 3

Evaluation of bids

2-3 months

1 mo 3 d / 1 d

1 month 6

Negotiation 1 month

none - 3 months 2

”Second step”

2 months

none - 1 month 3

Final evaluation

1 month

3 d 1 mo 3d/ 3d 0,5 months 3

EPC Contract

2 months

10 d 15 d 2d 3 months 2


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ICAEN: The main point was to audit technical weak points in one building and the public street lighting system in the f.s. and stops in the moment at ”Definition of Project Aims” which should lead directly to the tendering process. The duration for the decision making process was 7 months and needed 18 working days of ICAEN to go these steps together with the public authorities. The total process until the establishment of the contract is considered to take 20 months and 41 ICAEN working days.

JSP: The step- by- step structure is shortened in this project, a tendering process is not foreseen. Main argument to choose not an own F.S. is that a ESCO concept may be directly started and that in some cases the ESCO concept is free. After the decision making process a letter of intend or precontract is stated. In the next step, the ESCO will start up detailed measurements and the design and construction process.

RAEE: The decision making process is structured even more detailed in the preparation of the F.S. First RAEE has to convince municipal politicians to think about energy concepts and to kick off the internal decision making process with the realisation of the F.S. standing at the end of this first step. RAEE supports the public authority to define targets and to make sure that the external consultant will fullfill them. Remarkable is, that the public private partnership and the call for tender seem to be two seperated proceedings: the decision towards a public- private- partnership does not implement a call for tender.

AESS: Public lighting: From the beginning the subject of the audit was defined: public street lighting system in the city of San Giovanni. In the first two steps the collection of consumption and technical equipment data was finished. This intense data gathering in the fist steps is an excellent baseline which allows to define the target of the f.s. very detailed in the beginning of the project. For cost reasons this needs a letter of intent of the public authority to finalize the complete f.s. and pay for it too. In the F.S. the main item is the development and the comparison of technical measures. The last steps up to the contract rewarding are done in quite a short time. Hospital: the total working amount was smaller than in the public lighting project, which is due to the good cooperation, the profund data collection and the technical measures input both done by the hospitals technical staff.

ESS: Videum: The cooperation between a professional public real estate company and their main tenant (University) was the kick off of the proceeding. ESS joined to ensure both parties a balanced outcome. The ambition to do the FS were te analyse the buildings stock and the saving potentials with ESS to catalyse the outcomes and ideas of both partners. A six step procedure was used. The first two steps were discussions led by the real estate company and the University about a cooperation and the structure of it.

ESS joined in the 3. step for a first evaluation of the situation. Representative buildings were auditet by ESS to find out the magnitude of the savings and a priority list for the measures. With the help of ESS some difficulties in the framework conditions were solved (technical and contractual measures to define basic climate conditions, definition of the buildings load profile incl. Operation hours etc., and flexible baseline parameters f.e. changing educational plans, studends etc.). In the Vöfab company, ESS was also called as an external and neutral expert to bring on and enhance the already ongoing discussions. The town hall was audited by ESS and the technical staff of Vöfab. To avoid discussions based on the fear, that jobs could be lost by outsourcing proceedings, the audit was considering cooperative measures for internal capacity building. Other main items were saving measures with a strong impact on refurbishments and the contractual structures.

NELEEAC: Brent Town Hall: The client has not yet an existing energy management structure and requested specific support: to indentify and prioritise 5 energy saving measures and ongoing revenue savings.


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5.2.4 The acquisition process Result: As experience in the projects has shown, good approaches were:

• Presentation of results from reference projects to public authorities. This emphasises the importance of seminars and congress with adaptable best practice input foreseen within the PU- Benefs working agenda.

• In several projects a simple preeliminary study has been a successfull door- opener. It should implicate the revisal of the total energy costs (high enough to applicate energy services), a comparison of specific consumption benchmarks and a first on- site visit.

• Some partners report, that the decision making process in ESCO- projects is shortened because it has (normally) no or small influence on the expenses in the municipal budget. Instead of the municipal council the technical committe, as a subcommitte of the council, is making decisions on the item. Experience shows, that this sometimes leads to a shorter process.

• An important information to be collected in the beginning of each project are plans for the privatization of public services.

• Public lighting systems may be a good door- opener: it seems to have interesting saving potentials, the technical equipment needed for the measures is proven and the payback periods even for the replacement of light bodies are not so long.

ICAEN: The acquisition was started within a project information on energy service projects by Institut Cerda and ICAEN in Barcelona. Main point was to audit technical weak points in one building and the public street lighting system in the f.s. and stops in the moment at ”Definition of Project Aims” which should lead directly to the tendering process. The duration for the decision making process was 7 months and needed 18 working days of ICAEN to go these steps together with the public authorities. The total process until the establishment of the contract is considered to take 20 months and 41 ICAEN working days. JSP: The acquisition was done within information in the advisory board (WP 1). Buildings were choosen in which general reconstruction measures were foreseen. One main item was the specific heating energy consumption which was higher than the average similar building. RAEE: Main aspect to kick off the F.S. seems to be the over average energy expenses of the swimming pool. The municipality knows that thermal insulation and technical equipment is poor. Also important were ongoing examinations about a district heating system based on a wood chip boiler. AESS: Public lighting: The first contact is reported to be done by market partners: ESCOs and technology- providers pointing out saving potentials in preeliminary studies with specific energy saving projects like ”public lighting” etc. An important information to be collected in the beginning of each project are plans for the privatization of public services like in this case the office for public lighting which is planned to be closed down. Hospital: Similar to JSP AESS invited the hospital management to the first advisory committee session. The hospital management wishes to reduce energy costs and was looking for an external help to accompany them. ESS: Videum: ESS was invited to join and catalyse the technical and contractual discussion between a real estate company and their main tenant and to control the FS done by external


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consultants. This is a typical role for the neutral energy agency. The main argument to convince both parties were the savings and the contract forseeing a fair sharing of the savings and risks. Vöfab: The aquisition process was driven by the politicians and Vöfab owners and ESS. NELEEAC: The Council does not have an existing energy management structure for its own properties. The Environment and Culture department has taken responsibility to initiate energy efficiency improvements for its corporate buildings and is seeking to develop a strategy that would engender a more proactive role in the energy management of its corporate buildings. The energy efficiency drive on the sites are individually motivated rather than devolved from a wider corporate level. Brent council commissioned NELEEAC to carry out a comprehensive feasibility study for the Bridge Park Community Leisure Centre. NELEEAC is then expected to use the recommendations of the report to develop a comprehensive improvement plan to Energy Performance Contracting project on behalf of the Council. The Bridge Park Community Leisure Centre building covers an area of 5,387m2

and spends approximately £72,928 per annum on primary energy (£13.54/m2). The partnering of the Council with Brent Energy Solutions is a useful mechanism for implementing staff awareness and training on energy efficiency matters. Council also indicated a willingness to consider the scope for contract energy management particularly with regards to the installation of the Building Energy Management System. KEA: Based on long- term contacts starting from the support to introduce reliable energy management structures in both the administrations KEA is assisting the design of the annual energy reports for the public buildings. Since two years some buildings with over average consumption benchmarks and energy costs > 50.000 €/a have been prioritised for the implementation of energy saving measures. The high complexity, the not existing technical staff capacity and lack of founding opportunities in the municipal budget were the main door openers in this project. See table next page.


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Partner First contact Preliminar

y study ? Decision making

process Contracts

made Costs calculated in

€ / F.S.

ICAEN

Institute Cerda presents results of nationwide Energy service project and invites custumer hereto

Cost study: public lighting with 50% of total energy expenses.

Buildings management of public authority+ICAEN+Institute Cerda. No further information on process given.

No further information

No further information. Time calculation: 3 days for prelimanary study + 10 days for feasibility study

JSP Invitation to PU- Benefs project advisory board

Benchmarking kWh/m³ heating and electricity

Preparation by municipal buildings management. Decisions for ESCO concepts are not relevant for municipal budget and are therefore decided in Technical commitee

No information 1- 2 days

RAEE RAEE assists municipality of Corenc

Specific energy costs €/m² swimming pool

-

FS contract betwenn ext. Consultant and municip.

-

AESS Technology provider

Done by provider or ESCO

Political and technical levels/ techical office f. Public lightiing will be closed down soon

No informations 15 d

AESS hospital

Hospital management and staff

Staff Hospital management - 10 d

ESS videum/ Vöfab

ESS as a neutral partner joins discussions between real estate company and their main tenant

Done by real estate company and the tenant s technical staff

Partnership between both parties - no info No info

NELEEAC

NELEEAC as consulting partner to define the targets of th municpality + to carry out the f.s.

By NELEEAC based on benchmarks and total consumption costs

Preparation of decision making in strategy and steps discussed between NELEEAC and political lieadership and decision making in th council

- no infos No infos

KEA

KEA is assisting the energy management implementation in both cities

Done by the energy managers of Weil and Lörrach

Technical committee and town councils decided

Contract between municipality and KEA: FS + tendering proceeding

40.000 € for the complete project management and the FS

5.2.5 Data mining process In the following overview the tools used to collect different kind of data is presented, the problems which occurred and the significant data which was used to propose the measures in the FS. It seems a problem in almost all countries for the public administrations to present consumption data and an overview on the technical equipment in the public buildings.


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Partner Tools used in

the F.S. Baseline data Remarks on the data

mining process Decision making

in the f.s. ICAEN Actually drawn up

forms to audit the initial situation and an excel evaluation tool for the evaluation of the measures calculated.

Technical information: lighting equipment, supply qualitiy, maintance works, operational data and the ”state of the art” in public lighting components such as bulb types and control/ regulation systems

No further information on the data mining process. Data was completely collected by ICAEN and Institute Cerda. The sources: public authority, maintanance company for costs (staff+equipment), general information on ESCOs etc.

Interest rate > 6% on the investment and technical feasibility

JSP No specific tools Technical and consumption data were collected by JSP.

No reports on difficulties

RAEE No specific tools Collected by the consultant.consumption data collected from the invoices of the energy supply comp.

Consumption data collected in invoices had no informations about existing submetering systems and the energy consumption of connected buildings

Energy consumption and cost savings and pay back time

AESS Lighting system / hospital

No specific tools Budget data for energy + maintenance cost

Good cooperation with the public technical office

Saving potentials shown in the preliminary study

ESS Done by real estate owner

Consumption data - Pay back period / successfull contract design for specific problems

NELEEAC Questiionnaire by NELEEAC

Energy consupmtion and costs

No current records available

Investment costs and pay back period

KEA Done by municipalities

Energy consumption, latest energy prizes, maintenance costs

Was taken from the latest energy report

Clear definition of saving measures to be realized in the project, pay back period and percentage of renewables

ICAEN: The datamining process was mainly organized on behalf of actually drawn up forms for public lighting systems. Interesting is the fact, that not only energy consumption but also maintenance works and costs are part of the feasibility study. The forms did included the data mining and also for the calculation of saving measures. All data seems to be collected by ICAEN and IC. No reports on problems to obtain specific data from the client. The decision making criteria is mainly based on the technical solution and the interest rate (IRR) which is considered > 6% on the investment made. JSP: No specific forms were needed. The needed technical and consumption data were collected by the F.S. provider. RAEE: The data collection was done by a specialized consultant. Submetering of energy consumption was taken into consideration. AESS: The data collection was done by AESS in close cooperation with public authorities.


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ESS: Metering and submetering systems and the energy utility owned by the real estate company made data collection quite simple. The tenants data was limited to average load profiles and to the climate operation conditions. Maintenance costs were not part of the collection for the roles and responsibilities would not change. In the Vöfab project a number of meters and submeters made data collection quite easy. NELEEAC: Own questionnaires were used. Electricity and Gas consumption are not currently recorded on the site and there is infrequent access to utility data. Additionally the inconsistency of any site monitoring complicates proper site energy consumption analysis for the sublet areas of the building, especially with respect to the electricity used in communal areas, gas used in the Kitchen and for water consumption. At present, this information is not collated and is not fed into a management reporting structure.

KEA: the PU-BENEFS questionnaire was used. For the data collection, the energy reports, the frequent energy management reports with information gathered from the frequent visits on-site of the building and some first weak point auditions could be taken as reliable source. The strategies and detailed measures were discussed together with the technical staff. 5.2.6 Results from feasibility study Results:

• Public lighting systems seems to have interesting saving potentials. There are remarkable differences in the specific average electricity consumption per lightspot and year (560 in Spain, 775 in Italy).

• Acceptance of complexe contractual structures, technical measures may be better when a neutral partner such as an energy agency is involved to check the proposed measures of the FS.

• Control systems for heating plants and rooms, the replacement of inefficient boilers, pumps and hot water storage as well as public lighting bodies and bulbs have often been proposed.

• Depending on the prices for primary energy, additional proposals were cogeneration and wood chip boilers. The wood chip boilers still have pay back periods > 12 years.

ICAEN: The results of the F.S. show an increasing number of lighting sources, total costs for electricity and maintenance of almost 1 Mio. €. Several measures (lamp replacement, tariff optimisation, flow regulation, energy management system and service adjustments) are calculated and packed together in 8 scenarios. Decision making criteria is mainly the potential cost savings, the total investments, the IRR and the pay back period in years. At least three scenarios still are in discussion. JSP: The F.S. highlightens frequency control systems in the ventilation system of a public swimming pool. No informations about savings and payback period are given. RAEE: The F.S. highlightens the complete range of energy saving measures in public swimming pools. Major savings by replacement of the boiler system, heat recovery in ventilation system, removable covert on the swimming pool and a new control system. The investment costs for some components seem to be calculated low (boiler with 400 kW 9.500 €) which leads to very attractive pay back periods.


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AESS: The weakpoints in the public lighting system had been technologically obsolete lamps, light bodies with too high light pollution as well as exeeding electricity consumption and maintenance cost. The measures included the replacement of the bulbs (new ones: Sodium vapour), the light bodies and step- down transformers and timing devices, which allow to manage the utilisation hours by an astronomic clock. This in total led to 36% of consumption savings and a pay back period of 6 years. The specific national average consumption per light spot is about 180 kWh / a higher than in Barcelona. Hospital: The measures foreseen were 3 new chp plants and an absorber conditioning system. ESS: Videum: The main weak point was the inflexible control system, which did not meet the functionality required to meet the flexible operation of the building. The saving measures should be carried out in a first step by the real estate company and been paid back by the tenant in several years. 25% of the savings remained with the tenant. NELEEAC: A comparison of the Town Hall with the benchmark energy performance indicators published in the Carbon Trust Publication ECG 019 “Energy use in offices” was used. The introduction of a 90 kWe CHP system, producing its own electricity would also minimise the electricity purchased. Whilst a CHP system would increase the overall gas consumption level, specific gas use for heating/cooling would be reduced as the plant room would be configured for the CHP to act as the lead boiler, producing heating and hot water. The implementation of zone controls, flushing and balancing of radiators and a building energy management system would significantly enhance the energy performance of the building. If all the prioritised measures are implemented, the aggregated savings from the measures identified represent a 63.95% reduction in energy consumption and a 47.17% reduction in cost or £35,933, which translates into direct cost savings. A reduction of 329.56 tonnes of CO2 emissions is also estimated per annum. The benchmark energy performance indicators published in Carbon Trust Publication ECG 078, “Energy use in sports and recreation buildings” shows that the energy performance of the Bridge Park leisure Centre is within the level of typical practice. The centre does have scope for improving its Electrical energy use performance by implementing good management practice and the recommendations outlined in following pages of this report. The electricity consumption would be considerably reduced if an effective monitoring and targeting control system was introduced for lighting and movement sensors for less frequently occupied areas such as dance rooms, toilet/shower areas, and the Sauna room. The introduction of a CHP system, producing its own electricity would also minimise the electricity purchased. Whilst a CHP system would increase the overall gas consumption level, specific gas used for heating would be reduces as the plant room would be configured for the CHP to act as the lead boiler producing heating and hot water. The implementation of zone controls, flushing and balancing of blocked pipes/radiators and a building energy management system would enhance the energy performance of the building. If all the prioritised measures are implemented, the aggregated savings from the measures identified represent a 47% reduction in energy consumption and a 36% reduction in cost or £ 27.549, which translates into direct cost savings. A reduction of 289 tonnes of CO2 emissions is also estimated per annum.


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Table – Part 1 of 2

Partner Measure Consumption benchmark

Actual cost €/a

Measures foreseen Consumption savings in %

Pay back period

ICAEN Public lighting system

71 kWh / inhabt. And 595 kWh / light source

El.:624.000€ /a maintenance: 441.000 €/a

Flow regulators, management software, lamp replacement,servive measures

37- 53% (!!) 4- 6 years

JSP Frequency control system in pool ventilation system

Heating: 150 kWh/m³ (av.:76) Electr.: 80,6 kWh/m³ (av.:43) Water: 100 l/visitor

No information

Frequency control system

No information No information

JSP Hospital H: 74,3 (av. 60) kWh/ m³ a E: 22 (av 30 ) kWh/m³a

No information

Refurbishment of ventilation system and of Heating piping

Heating piping: 5%

25 years

RAEE Swimming pool

65 €/m² 30 €/MWh nat. Gas and 72 €/MWh electr.

New boiler 12% heat recovery: 16% pool covering: 12% shw tap: 1% control system: 6% solar dhw syst. 6%

5,6 – 6,6 years

AESS Public lighting system

62 €/ light spot (av. 77 €) and 775 kWh/a,

163 €/MWh

All measures in total: 36% energy savings, 1198 t CO2/a

6 years

AESS Hospital 844 beds: 37 734 kWh th/a and bed + 28870 kWh el /a bed Average benchmarks?

? 3 CHP plants + 1 absorber conditioner+ chilling tower

31% primary energy in comp. w/splitted el.+ heating production. 9900 to CO2/a

6 years (static )

ESS Videum

University buildings

106 kWh th/m² 93 kWh el/m²a. 10- 15% over average new buildings

? -Upgrading of main DHC and DUCs in the buildings - training of technical staff

5 a 3 a

ESS Vöfab

Town hall 139 kWh th/m2 ? Decrease of air- flows w/ presence control, regulation valves for the heating system, internal roof floor insulation, installation of new fans and frequency modulation for fans

3,5 a 15 a


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Table – Part 2 of 2

Partner Measure Consumption benchmark

Actual cost €/a

Measures foreseen

Consumption savings in %

Pay back period

NELEEAC

Town hall Electr. Cost: 51358 l/a Gas Cost: 24815 L/a

Carbon Trust Publication ECG 019 “Energy use in offices” Electricity: 137 kWh/m² w/ good practice < 130 and average fair practice < 230 Gas: 187 kWh/m²a w/ 95 good practice, 175 fair practice

59 £ / MWh el 20 £/ MWh th

CHP 90 kW el Replacement of el. Heating system Zone controls Energy improvement plan Light movement sensors for infreq. Used areas

Cost saving chp: 18175/a 2566 /a 7600 /a 761 /a 2106

193 t/a / 5,6 years 1,95 1,18 4,2 5,7

NELEEAC

Leisure Centre

Carbon Trust Publication ECG 078, “Energy use in sports and recreation buildings 145/<96/<152 kWh el and 364/264/598 kWhth

40 £ / MWh el 20 £/ MWh th

CHP 90 kW el Zone controls Energy improvement plan Light movement sensors for infreq. Used areas Sauna doors

17.000 7.300 729 1.900 409

5,5 a 1,23 4,39 4,8 1,3

KEA Lörrach

High school/sec. School/swimming pool

See German Engineers Ass. VDI 3807 /1/2/3/4/5 and KEA F.S.

120 – 150 €/MWh el 45- 50 €/MWh gas

Wood chip boiler 750 kW district heating system, 3 new hot water storage systems w/ opt. Capacity, new lighting systems

Cost savings: 48% Gas and Electricity Energy Savings: 55%

12 years in realtion hardware investments and annual savings, 16 years including hardware, interest, maintenance + management costs

KEA Weil

Schools/swimming pool/leisure and sports centre

See German Engineers Ass. VDI 3807 /1/2/3/4/5 and KEA F.S.

120 – 150 €/MWh el 45- 50 €/MWh gas

Wood chip boilers 300 kW+ 150 kW w/ 3 small district heating system, 5 new hot water storage systems w/ opt. Capacity, 340 new lighting systems

Cost savings: 41% Gas and Electricity Energy Savings: 43%

13 years in realtion hardware investments and annual savings, 18 years including hardware, interest, maintenance + management costs


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5.2.7 Gained experiences and lessons learned

Results: • The model contracts have to be tailored on behalf of national framework conditions. To

avoid risks for the authorities (causing more obstacles than needed) and the ESCOs at least a table of the main contents which should be considered in a energy service contract should be discussed.

• To develop the energy service market It seems to be important to draw up technical specification for energy saving measures required by the client. This helps to minimize the audit and calculation cost of the ESCOs. Nethertheless the projects should be designed open, to leave space for measures designed by the ESCO and not foreseen in the F.S.

• The uncertainities resulting from the opening of national energy markets may be another obstacle. A way to a solution may be, that the baseline is based on a fixes energy consumption and the energy prizes stay variable. This needs an annual calculation of the savings and the total contract period needed to pay back the total invest. If gas or electricity prizes fall, the contract period will be stretched, increasing prizes lead to shorten the contract period.

• For good baseline data, helpful informations for the FS the good cooperation with the management and the technical department is an evident point.

ICAEN: The experience is not including a tendering proceeding so far. Still a contract model has to be designed reflecting the needs of the authorities to handle well known contract material and give away the risk. It is not sure that ESCOs will take part in a tendering process. RAEE: The swimming pool project seems to be too small for an ESCO- project. The main obstacle seems to be that the proceeding foresees an authorisation of the French ministry of finance to realise an ESCO project. Also the opening of the French energy market leaves uncertinties on the development of the energy prizes and the pay back periods. This effect has also been the case in other countries, where f.e. discreasing electricity prices led to a break down of chp- measures in ESP. AESS: The tendering documents for a EPC contract with fixed annual amounts per light point are prepared in the next step. Good preparation and good framework conditions helped to bring the project on the way: that the municipality has the need to use ESC or other ways of Third Party Financing to avoid trouble with the national restrictions on maximum debt. Also the general policy of personnel reduction is very helpful for the decision to continue the project. Hospital: the cooperation with the technical staff of the hospital and the acceptance of the project within the management were crucial points. ESS: The proceeding choosen in the Videum was a step by step project evaluation and negotiation guided by ESS. It helped to overcome the both parnters to finalize their contractual and technical discussions with both parties finding in a balance of their divergating items.


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NELEEAC: The clients did not have the required data such as the O&M, specification drawings for the existing system or plants. NELEEAC visited the respective sites and obtained information for preparing the feasibility study report. Monthly energy consumption data were not available due to not having separating metering to the relevant sections also the meter readings available are either quarterly or estimated. KEA: The energy management system installed by the public buildings administration and KEA proved to be a reliable base line for the FS and the tendering process. 5.3 Results of the feasibility studies More detailed results of the feasibility studies carried out by the project partners can be found in section 12.2 of this report.


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6. Design of contracts for energy efficiency services Within this task the variety of contract forms that are currently being used or are being developed by the partners have been studied. Also other contract forms used across the EU were taken into account in view of developing a partnering approach with local authorities and other public sector organisations for the delivery of energy efficiency services. In a first step a guideline was conceived by partner TEL in exchange with the partners (see chapter 6.1). The adaptations made by the partners to fit to the specific needs of the local authorities in their countries are presented in chapter 6.2. The design of these model contracts in the partner languages can be found on the partners web pages. 6.1. Guideline for the design

6.1.1 General intentions and details of parties This section is used to clearly state what this contract is for and how it will work. It is an overview of the agreement and also gives the official names of the company and municipality and the names of the people who are the main contacts. It is through this formal contract document that both parties wish to work together in co-operation to achieve the goals of

• Increased energy efficiency resulting in a reduction of CO2 release to the environment.

• Reduced energy costs for the Client • Reward of profit on activities carried out for the ESCO

The intention of this contract is mainly to support the reduction programme of CO2 in the environment as well as to reduce the energy costs of the client. (Change as required) This intention is to be fulfilled by - the renovation/repair of the facilities/building/realty and/or - the ongoing operation and maintenance of the facilities/building/realty (as detailed in appendix xxx (Change as required)) Based on the baseline survey of the facilities with respect to the energy usage, energy costs, state of repair of machinery/plant, the resulting measures are considered to be necessary by both parties to this contract. The baseline survey results are listed in Section 2 (Baseline facilities and Costs). These measures to be implemented are listed in Section 3 (Scope of project). The Parties have the understanding that the Client/ESCO shall pay for the investment with savings accrued during the contract period/investment to be recouped from savings. (Change as required)


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DETAILS OF PARTIES

CLIENT

Address 123 First Avenue Our Town ABC 123

Authorised Project Representative for matters relating to this contract. Contact: Tel: Fax Mobile: e-mail:

ENERGY SERVICES COMPANY (ESCO)

321 Power Hill Mytown XYZ 456 Authorised Project Representative of the ESCO for all matters concerning this contract. Contact: Tel: Fax: Mobile: e-mail:

INDEPENDENT CONTRACTOR Nothing in this agreement shall be construed as creating a partnership, a contract of employment or a relationship of principal and agent between the Client and the ESCO. (see 2 and 9.3) 6.1.2 Baseline facilities and costs This section sets out the situation before contract implementation. Appendix 1 can be used to file a report (perhaps by a 3rd party) detailing the precontract site description and all information about the precontract costs. In order to determine the annual energy reduction, it shall be necessary to fix the consumption of the base year and in what context the fuel was used. The following sections record all baseline information. It is suggested that a full description is put in Appendix 1.

A. BUILDING FABRIC The existing building/facilities/realty consists of: Insert here a description (3.1) of the building, its uses, its address, etc

B. EQUIPMENT SCHEDULE Insert here a description of the existing energy systems such as heating by electric, by gas, by oil. Detailed information of types and model names etc of plant, including boilers, instrumentation and controls, lighting type, age status etc., (or All as detailed in Appendix 1)


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Important. Gather as much detail about the initial state of the building as possible. This is the only time you can and this will be the definitive record.

C. ENERGY BASELINE COSTS AND TARIFFS Example of Energy consumption and cost of the particular building. Heat Consumption

(kWh) Costs (Euro/kWh) Period of

Time. Total Costs in

base year VAT (Euro)

123.456 Tariff 1 Summer 0.055 Winter 0.0587

April 2005 – April 2006

6,789.5 2,345

Tariff 2 High Tariff 0.0876

D. OPERATING TIME OF BUILDING (EXAMPLE ). Operating Time Remark Mon – Fri 0700 – 1400 Elementary School Mon – Sun 0630 – 2330 Apartments 25 hours per week Council meetings

E. AVERAGE DEGREE DAYS (20 YEAR AVERAGE) AND DEGREE DAYS IN YEAR WHERE COSTS/ENERGY USAGE IS AVAILABLE. Example: Degree-day data for region: N E Scotland Actual 20-year Month Degree Days Average ------ ----------- --------- Jan-05 302 383 Feb-05 315 333 Mar-05 292 320 Apr-05 243 261 May-05 195 194 Jun-05 96 116 Jul-05 63 62 Aug-05 63 69 Sep-05 84 116 Oct-05 150 211 Nov-05 298 292 Dec-05 328 366 ------ ----------- --------- Total 2429 2723 ------ ----------- ---------

F. COMFORT LEVELS (EXAMPLE) Room Time Min Temp Max Temp. Toilets 0700 - 2000 15° 25° Corridors 0700 - 2200 15° 23° Gymnasium 0830 - 1500 12° 25° Infants Rooms 0630 - 1400 20° 24°


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Sauna 2000 - 2400 30° 40° Kitchens

G. AIR CHANGES (Enter here any details of air volume changes)

H. ENERGY SAVINGS TARGET The parties have jointly agreed the targets as stated below. Savings targets are set on the following basis: Key standards to be followed. System run times, capacity levels and comfort levels are to be maintained at Baseline year levels. Energy consumption in the last X years- ???? Measurement and studies carried out- ??. Savings Target. The target is to achieve, with actions agreed in this contract, the following savings: Estimated/measured Baseline Heating Energy Consumption is xxMWh/a According to this agreement, the ESCO guarantees, that after system commissioning and all actions, the consumption of primary energy will not exceed yy MWh/a (normal/identical year) Estimated saved energy is xx-yyMWh/a and during the contract period of aaa years and therefore the total saved energy amount will be zzzz MWh. Baseline energy price is ee €/MWh and thus present energy cost is qqq (excl VAT) ESCO and client shall work in close cooperation in order to make sure that all actions, installations and maintenance is according to the contract and follow up on all savings received. Calculation of Savings Target The achieved saving shall be calculated annually: The calculation period is ____.___ to ____.____. To adjust the annual heating demand, the local heat index shall be used. The annual standardised heat consumption is calculated as follows: Qnorm = Q x Sd norm/Sd comparison etc etc. Follow up and measurement In order to measure the energy consumption in the building energy meters shall be installed “wherever you fancy” etc. Energy consumption shall only be measured from certified energy meter readings. The Client/or/ESCO is responsible, at its own cost, in ensuring that the energy measurement system is functioning properly. Etc


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OR The energy costs baseline has been determined on the basis of the calculation instructions set out in Annex x. The parties determine an overall energy cost value (energy costs baseline) based on the calculation regulations and the reference period as follows:

Example Reference costs net / reference period 01/04/2005 to 31/03/2006 Gas: € 0.00 per unit Oil: € 0.00 per litre LPG: € 0.00 per litre Solid Fuel: € 0.00 per tonne. Wood Chips: € 0.00 per tonne Heat: € 0.00 per unit Electricity: € 0.00 per unit Water: € 0.00 per m³ Energy costs baseline: €0.00

TARGET COSTS The energy costs baseline in the reference period is based on the energy supply prices (net) of the respective energy suppliers per consumption unit and part of the contractual object applicable to the relevant period in accordance with Annex ?. The Client shall be under an obligation to let the ESCO examine the calculation documents which form the basis of Annex x and make copies of the documents at the ESCO’s expense at any time upon first request.

SAVING GUARANTEE As its main performance the ESCO represents and warrants that the energy saving measures from the beginning of the main obligation to perform until the end of the Contract will reduce the above mentioned energy costs per settlement period by an amount of € net excluding turnover tax, in accordance with the calculation principles agreed. (This obviously is dependent on energy tariffs. Beware.) 6.1.3 Scope of project Energy savings are intended to be achieved by the following actions: (Short description of intended actions) e.g. installing CHP, ground source heating, insulating roofs, double glazing, ventilation, cooling system ,cold and hot water etc., followed by their operation for a period of ß years. These actions are described in more detail in appendix xx The Client will order and the ESCO will supply the following System. (Short description of hardware to be delivered) eg 12kw CHP unit and TRVs The system is described in detail in appendix yyy The scope of the ESCO’s work will cover design, fabrication, erection, commissioning, operation, fuel supply, dismantling and… The client/or/Supplier is responsible for the maintenance of the equipment included in the system during the contract period.


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The ESCO has the right to connect the system to its own remote monitoring system. The control of the system and the building indoor environment will be controlled and monitored by ESCO supplied equipment. The Client has the/no right to alter these controls without consent from the ESCO. The ESCO has the right to make check visits and change system settings; however the agreed indoor environmental conditions must be met. 6.1.4 Liabilities This section sets out the liabilities of each party. i.e. the things that they are expected to carry out as part of the contract. It comprises more than is required, and any items not required should be deleted.

ESCO’S LIABILITIES During the period of the contract the ESCO shall be (Delete if not) liable for:

a) Designing and engineering such energy saving measures as are required for the achievement of the set targets. Such measures may include, but are not limited to those dealing with heating the building, cooling the building, provision of hot water, provision of cold water, lighting, water supply and /or treatment, waste disposal, fuel purchase and fuel sales

b) Specifying, tendering and awarding works under this contract. Contractors chosen to be awarded works shall be regarded as under contract with the ESCO/Client (delete as applicable).

c) Financing and/or purchasing all capital equipment.

d) Remunerating all contractors’ costs for installing the equipment.

e) Remaining qualified as in Appendix 3.

f) Providing information, instruction and training for the Client personnel in the operation and maintenance of the system (if Client ops & Maintenance). Details, quality and quantity shall be agreed before signing.

g) Checking periodically that instructions (f. above) are being followed.

h) Reporting to Client of all deviations noticed during such checks.

i) Investigating if components or system not operating to specification.

j) Reporting to Client if improper operation is resulting in targets being missed.

k) Maintaining the equipment. However if the ESCO fails promptly to carry out any work including maintenance which it is required to carry out then the Client may give notice to the ESCO requiring such work to be carried out and if, within seven days of any such notice, the ESCO has failed to take reasonable steps to have such work carried out or if at ant later date the ESCO fails to proceed diligently with such work, then the Client or its representatives may thereafter carry out such work and deduct the cost of those works out of any annual service charge.

l) Ensuring that it’s staff follows good workmanship standards.

m) Providing to the Client, at least once per year, details of the water treatment and a chemical analysis of the hot water generated by the system. Standard of such report to be agreed before signing.


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n) Maintain in good condition and repair the Existing Plant until the works are carried out.

o) Providing and ensuring the suitability of the New Plant and Equipment and ensure that it complies with statutory requirements and is sufficient capacity to carry out its obligations under this agreement.

p) Keeping the energy system in a good state of repair and condition, as may reasonably be necessary to enable it to carry out its obligations. If any alteration is required to be made to the energy system in order to provide the service, then the ESCO shall carry out the works at no cost to the Client.

q) Preparing a dossier of drawings, manuals (both operating and maintenance), test certificates and databases relating to the installed equipment.

r) Preparing a maintenance regime for the equipment. Such regime shall consist of tasks, periodicities, lubrication schedules, testing schedules and the like.

s) Keeping all drawings, manuals and databases up to date.

t) Preparing and submitting to the Client for approval all necessary applications for planning permission and other applications for consent and approvals for the installation of new plant and equipment and operation of the system.

u) At all times during the period of contract, making available continuous supplies of heating and hot water to the Client and Occupiers.

v) Indemnifying the Client against any loss or damage to the New Plant and Equipment due to any vandalism, negligence, neglect. Tampering, error or any other act or omission on the part of the ESCO, his representatives, agents or contractors.

w) The ESCO is not liable for any indirect or consequential damage if not caused by conscious action or gross negligence of its staff.

CLIENT’S LIABILITIES During the period of the contract the Client shall be (Delete if not) liable to: a) Use the equipment and systems included in the project according to the instructions

given by the ESCO.

b) Report immediately all failures and/or breakdowns of equipment to the ESCO.

c) Report information the ESCO may need in order to successfully perform its contract obligations including:

• any disruption in energy consumption.

• any results of inspections and tests.

d) Let the ESCO representatives perform maintenance, checking or adjustment at agreed times.

e) Send a report to ESCO within xxxx days of end of reporting period, where savings are shown based on continuous measurement. The report may consist of copies of relevant energy bills, meter readings (where ESCO does not have remote indication), other agreed and relevant reports.

f) Inform without delay all activities or circumstances which may affect the project’s services or liabilities.

g) Keep the structure of the facilities in a good state of repair and condition.


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h) Co-operate with the ESCO in order to ensure smooth cooperation with Client personnel in all phases of the project.

i) Bring its contribution for the successful implementation of the project.

j) Ensure that it’s staff carry out their duties in a professional and safe manner.

k) Provide the ESCO with copies of all known drawings and operating manuals in the Client’s possession relevant to the ESCO’s performance of this agreement.

l) Provide all Baseline Data

m) Carry out routine maintenance in line with the recommended program. (If maintenance is carried out by Client, yet not in strict accordance with regime supplied by ESCO, then any downtime, and resultant loss of savings, will not reflect on ESCO’s income.)

n) Agree to provide the ESCO with a monthly payment to cover the ESCO’s outgoings, in the event that the ESCO is prevented from performing its duties by factors beyond its control.

o) Effect an insurance after the completion for the whole duration of the contract. This insurance is against all risks like fire, explosion, theft and pilferage, vandalism and floods. The ESCO has the right to be shown the documents to make sure that the insurance is effective.

6.1.5 Schedules This section is included to clearly state the start and end dates of of the contract and or its various sections. . This project shall consist of 2 phases: the Construction Phase and the Operational Phase. Project start Date: __/__/20__. (The Effective date) The system and its associated services shall be started up no later than __/__/2___. This date marks the finish of the Construction Phase and the start of the Operational Phase. The Operational phase shall run for ***years The Expiry date of this contract shall be __/__/2_


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6.1.6 Safety and environmental protection This section is included especially for states where safety legislation is specific. The words below actually apply to UK legislation. It also includes the client’s checking of designs and for an Environmental assessment to be carried out. a) The ESCO shall be responsible for the compliance of each of its Contractor Parties with all applicable health and safety legislation, rules, regulations and requirements of statutory or regulatory authorities.

a.a Accidents to the ESCO’s or Sub-Contractors’ employees or agents which ordinarily require reporting in accordance with national legislation, shall be reported immediately to the Client.

b) Where the CDM Regulations apply to the Works, the ESCO shall assume the obligations on behalf of the Client as the client for the purposes of the CDM Regulations, and in complying with its obligations in respect of the CDM Regulations, the ESCO shall:

• Make a declaration to the Health and Safety Executive in accordance with paragraph

4(4) of the CDM Regulations that it is the only client in respect of the Works;

• Appoint a Planning Supervisor and a principal contractor in respect of the Works and to take such steps as are in the circumstances reasonable to ensure that each is provided with the relevant information to enable him to perform his duties under the CDM Regulations;

• Allow sufficient time and resources to enable the Planning Supervisor and principal contractor to comply with their obligations relating to health and safety matters arising from the CDM Regulations and to co-operate with them to that end;

• Notify the Planning Supervisor and principal contractor of any change in the circumstances relating to the Works of which it is or ought reasonably to be aware which may affect the health and safety of persons involved, or likely to become involved, in the Works;

• Comply with the health and safety plan;

• Include in the design all information relating to the design and materials which might reasonably affect the health and safety of persons working on the Works and its maintenance and repair;

• Procure and deliver to the Client upon the Service Commencement Date the health and safety file prepared, maintained and completed as required by the CDM Regulations.

c) The Client shall be responsible for the compliance of each Client Party with the applicable health and safety legislation, rules, regulations and requirements of statutory or regulatory authorities and shall provide to the ESCO with information which it has in its possession and which it reasonably considers would assist the ESCO in the performance of the ESCO’s Obligations. d) Design Development. Notwithstanding the fact that the ESCO must design and engineer the facilities, the fact that the facilities are in fact a modification to the Client’s building requires that all designs are shown to the client before construction commences.


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e) The ESCO shall not commence construction of any part of the Works in respect of which the Reviewed Design Documents relating thereto have not come into being. f) The ESCO shall at its own expense prepare and/or procure the preparation of and submit to the Client’s Representative three copies (including copy negatives and CAD disks) of the Outstanding Design Documents which clearly demonstrate and fully describe the ESCO’s proposed design for the Plant and Equipment. g) Environmental Impact Assessment (EIA). Notwithstanding the fact that the overall aim of the project is environmentally positive, the ESCO shall conduct an EIA on the complete project with a view to minimising all impacts, such as noise, waste, vents and other damages. 6.1.7 Payments

NORMAL PAYMENTS MECHANISM It is understood by both parties to this contract that all/percentage of the calculated monthly savings are to be paid to the ESCO. Such calculations are to be made by the ESCO, presented to the Client and, if approved, paid within 30 days. OR It is understood by both parties to this contract that one twelfth part of the annual targeted savings will be to the ESCO each month. At the end of each twelve month period, a reconciliation of savings and payments will be completed. The total 12 month difference (either positive or negative) is to be carried forward to be added to the target savings for the next twelve month period. Reductions in energy costs shall have the following reduction mechanisms:

• Reduction of kWh delivery will be xxx% effective for ESCO’s remuneration. • Reduction of peak demand delivery will be yyy% effective fo ESCO’s

remuneration. • Reduction of tariff charges will not be effective for ESCO’s remuneration. Tariff

changes will be beneficial/detrimental to the client only.

ADVANCE PAYMENTS

The price of the system is _____________ Euro. During the supply period the Client shall pay to the ESCO advance payments as follows: (This is included in the case of third party financing where payments may be due before supply period completion)

CARBON REDUCTION PERFORMANCE PAYMENTS

DEVIATION FROM SAVINGS TARGET

In the case that the agreed saving is not achieved, the ESCO shall compensate the exceeded energy consumption to the Client in full. In the case that the agreed saving is exceeded, the Client shall pay the ESCO 50% of the achieved additional savings.


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In the case that the agreed saving is not achieved or cannot be verified as not achieved due to common nuisance, temporary closing of facility, break in production, operation of equipment differently from instructions, strike or other reason beyond control of ESCO, the ESCO is not responsible for possible deviation from set target.

INTEREST ON LATE PAYMENTS

Each Party shall pay interest on any amount payable by it under this Agreement not paid on the due date, for the period from that date to the date of payment at the Default Rate.

VALUE ADDED TAX (VAT) All amounts due under this Agreement are exclusive of VAT. If any supply made or referred to in this Agreement is or becomes chargeable to VAT then the person receiving the supply (the “Recipient”) shall in addition pay the person making the supply (the “Supplier”) the amount of that VAT against receipt by the Recipient from the Supplier of a proper VAT invoice in respect of that supply. Where under this Agreement any amount is calculated by reference to any sum which has or may be incurred by any person, the amount shall include any VAT in respect of that amount only to the extent that such VAT is not recoverable as input tax by that person (or a member of the same VAT group), whether by set-off or repayment). The ESCO shall provide the Client with any information reasonably requested by the Client in relation to the amount of VAT chargeable in accordance with this Agreement and payable by the Authority to the ESCO. 6.1.8 Legal framework

A. PLANT OWNERSHIP (Ownership by ESCO) The property in the New Plant and Equipment shall not pass to the Client by virtue of this contract and nothing in this contract shall be construed as providing that the property in the New Plant and Equipment shall pass to the Client. The New Plant and Equipment is not and shall not become the property of the Client. Accordingly, the Client shall not be entitled to sell, assign mortgage, charge, pledge, sub-let, part with or share possession of the New Plant and Equipment or any part thereof. (More paragraphs available!)

B. INTERRUPTION OF SERVICE The Client acknowledges that works of repair, maintenance and testing are essential and that the service may be temporarily interrupted to accommodate such work. The ESCO shall endeavour to arrange all such work by prior agreement with the Client and Occupier with minimal disruption and loss of service.

C. INDEPENDENT CONTRACTOR Nothing in this Agreement shall be construed as creating a partnership, a contract of employment or a relationship of principal and agent between the Authority and the ESCO.


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D. WAIVER No term or provision of this Agreement shall be considered as waived by any Party unless a waiver is given in writing by that Party. No waiver under this clause shall be a waiver of a past or future default or breach, nor shall it amend, delete or add to the terms, conditions or provisions of this Agreement unless (and then only to the extent) expressly stated in that waiver.

E. FORMAL AGREEMENT Unless otherwise stated in this Agreement, this Agreement together with relevant documents referred to herein constitute the entire agreement between the Parties in connection with its subject matter and supersede all prior representations, communications, negotiations and understandings concerning the subject matter of this Agreement. No Party has relied on any representation except as expressly set out in this Agreement.

F. SEVERABILITY If any term, condition or provision contained in this Agreement shall be held to be invalid, unlawful or unenforceable to any extent, such term, condition or provision shall not affect the validity, legality or enforceability of the remaining parts of this Agreement.

G. COUNTERPARTS This Agreement may be executed in any number of counterparts, all of which when taken together shall constitute one and the same instrument.

H. LAW OF THE CONTRACT AND JURISDICTION This Agreement shall be governed by the laws of [country] and subject to the Dispute Resolution Procedure, the Parties submit to the exclusive jurisdiction of the Courts of [country].


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I. NOTICES Any notice to be given under this Agreement shall be delivered personally or sent by post or by facsimile transmission or by electronic mail to the address or facsimile number of the other party set out below: -

Client: [ ]

FAO: [ ]

Address: [ ]

Facsimile Number: [ ]

E-Mail [ ]

ESCO: [ ]

FAO: [ ]

Address: [ ]

Facsimile Number: [ ]

E-Mail [ ]

Any such notice shall be deemed to be served, if delivered personally, at the time of delivery or, if sent by post, 48 (forty eight) hours after posting or, if sent by facsimile transmission, 24 (twenty four) hours after proper transmission evidenced by a confirmatory transmission sheet not indicating any transmission error and provided always that a copy of the notice is posted by recorded delivery post to the receiving party on the day of transmission.

J. CONFIDENTIALITY The parties of the contract are obliged to keep all information received with regard to this contract secret towards third parties who are not involved. However, the ESCO may inform co-workers, subcontractors and other third parties if necessary and as long as they keep the received information secret themselves.

K. CANCELLATION OF THE CONTRACT The client can withdraw from this contract

• if bankruptcy proceedings are instituted against the ESCO; • if the ESCO violates clauses of the contract even after repeated warnings;


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The ESCO can withdraw from this contract

• if the client does not meet his obligations culpably; • if the client prohibits the necessary workings concerning the building or the technical

equipment; • if the access/utilisation of the building at any time is not warranted for the ESCO; • if the client prohibits the attainment of the energy cost savings object on purpose; • if bankruptcy proceedings are instituted against the client or if they are refused

because of too little property; • if the client does not hand in data of the metering or any other specific information in

time despite the request of the ESCO; • if the ESCO violates clauses of the contract even after repeated warnings.

In the case of the cancellation of the contract on the part of the ESCO, the ESCO has the immediate right of remuneration amounting to the open amount of money. The guaranteed energy cost savings are considered as obtained for the whole duration of the contract.

L. SETTLEMENT OF DISPUTES

(1) In the case of disputes concerning the energy savings, the energy agency of the country where the building is, shall be engaged as an arbitrator for the settlement. If the client, the ESCO and the energy agency cannot find an agreement within two months or if the energy agency refuses an involvement, each party can ask at the chair of the national chamber of commerce for the provision of a certified expert. Such an expert will prepare a report. The costs shall be divided between the client and the ESCO. The report is not obligatory for the parties but a basis for the further settlement out of court. (2) In the case that a settlement of the dispute is not possible, it is agreed that court action will be used. See section 12.1 : Annexes to contract guideline

• Appendix 1 general data required for a building in view of an EPC ; abbreviations and definitions of terms used ;

• Appendix 2 : qualification of submitting companies ; • Appendix 3proposal for the evaluation of different bids.


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6.2 Contract models designed for Rhône-Alpes, France In France, the Procurement Contract Code makes it compulsory to separate investments and operating costs for any equipment, and prohibits the use of operating costs as part payment for investments. It is therefore not easy to set up energy efficiency services including the investment. Since 2004, a decree has authorised public-private partnership contracts which must allow the creation of contracts incorporating the investment. However, application conditions are limited (urgency or complexity and proven economic benefit) and the procedure is complex. For the time being, the only energy efficiency contracts that exist concern public external lighting.

Within this context, the main energy efficiency services that can be implemented by authorities are operating agreements with profit sharing and guaranteed results. The authority can then, based on guaranteed savings, use leasing to finance its investments. We have therefore chosen to draw up an example of an operating agreement containing all of the standard articles and have directly added to the contract model:

- Texts allowing profit sharing to be added (in green) - Texts allowing the full guarantee to be added (in red)

This contract model was drawn up based on examples of contracts and specifications guidelines for operating agreements published in June 2007 by the Ministry of the Economy. We have attached to it the general and technical terms and conditions allowing calls for tender to be launched. We have also asked a legal adviser (Cabinet Merlin) to provide technical and legal comments on the model in order to attract users’ attention to key points in the contract and limitations imposed by the Procurement Contract Code. All of the documents proposed can be downloaded with the CDROM on the web site: http://www.raee.org/pubenefs_cdr/services.swf allowing any authority who so wishes to launch a call for tender with profit sharing and full guarantee, to be in compliance with the Procurement Contract Code. They must of course be completed on a case by case basis with

- data specific to authority equipment and buildings (list of equipment, consumption objectives…)

- specific requirements: equipment renewal, price revision indexes… Adaptation to each specific case is very technical and it is advised to use a specialist consulting office to assist them the first time that they carry out the process. This example was used in summer 2007 for the Grand Roanne Agglomération call for tender, as part of the Pubenefs project, with the support of specialised consulting office (GIRUS, Lyon, France). This example has been added to the French Pu-benefs web site.


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6.3 Contract models designed for Emilia-Romagna, Italy The contract model designed for the context of the Emilia-Romagna region is a blended one. The model is split up in 2 main parts: 1 concerning the ordinary energy service (O&M), 1 relating to specific energy saving measures: the Italian Local Authority is interested to join the different functions (O&M, retrofitting and energy supply) into one only “Global Energy Service” contract ---> mixed Supply+EPC contract defined in the New Directive 2006/32/CE “Combined Energy Saving and Delivery Contract” In the bids evaluation, a share will concern costs and quality of the service, while one other will regard the percentage of guaranteed saving (for the same duration and saving %, over the minimum, admitted by the Local Authority), beside the quantity and quality of the foreseen investments regarding the technical evaluation. Among the several contract versions, there could be the one concerning the sharing of the guaranteed saving between customer and ESCO. Over the last 10 years, the Energy Service has been implemented mainly in the public sector and, though less, in the blocks of flats. In the initial phase the contract has been implemented in a very utilitarian way, limiting the service to the energy supply and to O&M activities, with a little attention to the technological renovation and to energy saving aspects. The Finances Ministry controls nevertheless were addressed to formal aspects. In the last years, following the boiler’s technological evolution (with high efficiency compared to the existing boilers, usually obsolete and in bad conditions) the proposals by the market actors focussed on the replacement of old plants, with retrofitting and in compliance with the law measures on the overall central heating system. This way of implementation of the Energy Service could be compared to the contract typology called in the Directive 2006/32/CE, Energy Supply Contract or “Facility Contract” or “Delivery Contract”, in other words Delivery of useful energy. By this contract, the service supplier becomes responsible for the financing, design, implementation and management (fuel procurement, ordinary and extraordinary O&M, selling) of an energy production plant (both thermal and electrical or even CHP) used for a specific building, new or existing. The service profit is due to the payment of the useful energy actually delivered and in some cases, to the contribution achieved for the value of the implemented plant. The technical skills of the service supplier allow better performance and efficiency, thus making possible a reduction of the consumption of primary energy and a competitive price of the produced energy. The main objection toward the Energy Service normally implemented is that the interest of the user (to reduce his own final consumption) is opposite to the plant manager, paid proportionally to the consumption computed by the heating meters. The control of the heating power station and of the plant is usually in the manager’s hands, who can be tempted to increase instead of decrease the consumption.


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During the 1st meeting of the Pu-Benefs Advisory Committee the issue was debated and some proposals were put forward. The first concerns the replacement of the “mono-tariff” (directly proportional to the computed heat, generally 15-20% of the overall amount) with a two-tariff (one amount – including the labour costs – is fixed, while another amount is variable – covering the fuel costs). This way the interest of the plants manager in increasing unjustly the consumption is limited, since on this amount he has no relevant profit margin. The second solution is to limit the consumption control to the plants manager, i.e. through the use of thermostatic valves on the radiators or the computing for each flat or sector. A third possibility is to combine a Energy Supply Contract with the basic elements of the Energy Performance Contract (the energy saving objective is reached through either technical or behaviour measures). This type of contract allow to work either on measures concerning the generator or on downstream measures (i.e. regarding the temperature control, the automatic system of building energy management, the attention to avoid wastage). This type of contract could be defined “Combined Energy Saving and Delivery Contract” These models are already applied in several of the Municipalities we are working with, showing to be quite successful, both in terms of energy and money saving for the public body implementing them. The contract model normally adopted can be downloaded from the AESS website, section “Cosa Facciamo – Pu-Benefs”


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6.4 Contract models designed for Baden-Württemberg, Germany Due to the demand of the public authorities, energy supply contracting is more or less drawn from the agenda by EPC projects. Other services discussed such as leasing or financial services do not play an important role in our region. The type of contract which we have given priority was the EPC model contract. The DENA EPC model contract with some specific adjustments meeting the needs of our EPC project design, mainly the long contract periods and features related to the consequences of such contract periods. Adjustments were made in the ESCO duties on maintenance and refurbishment of the energy saving investments (sharing of the risk between ESCO and administration or a complete risk overtaking by the ESCO). The adjustments of the measured energy savings also were highlighted. According to recommendations and experiences of other project partners we started to simplify the methods for the calculation of the adjustments. Other shortfalls of the DENA model contract were taken out. The market implementation strategy for PC projects which is preferred by KEA in Baden Württemberg is based on energy saving measures which are supporting refurbishment measures which have more or less only indirect impact on the energy consumption of the building. This strategy meets very successful the requirements of PPP projects in Baden- Württembergs communities. The results of this strategy are long term contract periods which have been reached in some projects 18 years. The effects on the content of the contracts are additional regulations for changing using conditions, changing ownership, and the duties of the contractor for the maintenance and reinvestment in his energy saving investments in such long contract periods. The draft version of the model contract has been discussed with experienced municipalities and performance contractors in May 2007. These discussions created a general acceptance of the model contract and keepg it close to the latest market developments. The content table of the proposed model contract is available on the KEA web site www.keabw.de/index.php?id=90.


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6.5 Contract models designed for United Kingdom There are a number of contract types used in the UK, principally these relate to the EPC and shared savings contract types that are purely management related. Priority is given to EPC type of contracts which include finance and end user performance measurements. The key features of the contract models are

• definitions & abbreviations. • general Intentions. • results of feasibility studies • baseline and benchmarking – Facilities & Costs. • scope of Project. • liabilities of both parties. • schedules of existing equipment. • health & safety considerations • payment structures • legal arrangements and jurisdiction • appendices

The contracts used were derived from Government contract formats already established by: The Carbon Trust, The Energy Saving Trust for developing ESCO services in the UK The lessons learned from applying these models are

• client knowledge base is low • financing structures for banks are not readily adaptable to ESCO project market

and do need a lot of reorganising to meet client requirements • very important to set out the base line positions and link them to benchmarked

performance criteria The contract models and case study details are note on the relevant section on the London Energy Supplies and services (LESS) and Thames Energy’s website.


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6.6 Contract models designed for Sweden

Type of contracts and key features

The Swedish versions of the ESCO and EPC contractual models are based on a set of four contract templates designed to be used in combination with “modified versions” of three well recognised standard contracts, jointly covering all phases of an Energy Service project. Due to the established usage of the three contract structure mentioned above, neither customers nor ESCO’s expressed any demand for new all-inclusive standard contracts. But all partners had an interest in credible QSI’s, quality securing instruments focusing on risk management and general guidelines and public procurement processes.

The work with model contract design has therefore been focused on providing a simple 6-step process, procurement and project development guideline, combined with four template models covering all steps from initial frame agreement to final guarantee and follow up agreement. Below a graphic illustrating the above mentioned structures are shown:

The 6-step process and procurement guideline

The three contract structure; ABK, ABT and ABFF

��

��

��-Prequalification-Tendering-Contract negotiation

��

� ��

1 2 4 5 63

��

The three contract structure for EPC and real estate development

1. DEA, Detailed EnergyAnalysis and ProjectDevelopment (ABK contract)

2. Project implementation contract (ABT contract)

3. Project follow up and savings guarantee contract(ABFF contract)

The result of contract 1 determines if, with what content and onwhat terms the project will move forward to contract 2. At this point is normally also contract 3 signed.

Since Sweden currently don’t have any “standardised all inclusive” EPC contracts, a relatively progressive approach, of combining modified versions of other standard contracts are being applied. ABK covers the consultancy part of the DEA, while ABT covers an “all inclusive” building contract and ABFF covers the more structured O&M efforts (all these contracts can be incentive based)

Normally signed after step 3

The principles are agreed up on before step 3, but the exact content are determined by the outcome of step 4. Signed in prior of step 5

The principles are agreed up on before step 3, but the exact content distribution of responsibilities are determined by the outcome of step 4-5. Signed before step 5, adjustable


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The 4 contract template structure

Validation and cooperation

The PU-Benefs project has not intended to “compete” or create separate and different structures conflicting with the ideas promoted by the Swedish Energy Agency, the work has therefore been elaborated and closely linked to the Swedish Energy Agencies and WSP’s (Swedens leading ESCO consultancy firm) EPEC project. Also real estate economists at the branch organisation SALAR (Swedish Assiciation of Local Authorities and Regions) as well as a lawyer from SILF Competence (Public procurement and contracting experts) have supported the work.

Usage of models and lessons learnt

The models given account for above has so far been used for structuring at least five ESCO projects that currently are in a different stage of development. The models are regularly modified and adapted to the specific needs and prerequisites of the different customers and their projects. No formal evaluation of the contract models has been conducted yet, but experiences and feedback gathered from the networking with Forum for Energy Services indicate an overall positive feedback. However the feedback also highlighted the risk that this contracting structure, and especially its usage together with some very demanding and costly procurement structures, could increase the market barriers for new ESCO’s and thereby contributing to an unwanted market concentration with limited competition. The issue of balancing necessary demands for quality and structure, with the over all objective of developing a broad and diverse ESCO market, will be an ongoing challenge for the future Swedish ESCO work. Download of template models These Swedish agreements and its preceding RFQ and tendering guidelines can be downloaded from the webpage of the Swedish PU-Benefs partner Energy Agency for Southeast Sweden at www.energikontor-so.com and from the Swedish Energy Agency at www.energimyndigheten.se

1 Frame Agreement

2 DEA

Agreement

3 Building Agreement

4 Guarantee Agreement

PU-Benefs has significantly supported and influenced the Swedish models, especially in terms of: - Emphasis on Baseline calculation - Tendering and evaluation structure - The two-stage procurement model - Clearing roles & responsibilities - Guarantee & follow up structures - Financial models & understanding


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6.7 Contract models designed for Finland Some support is clearly needed for the starting phase of municipal EPCs, so a contract model for the call for tender was acquired. The second contract model is a general ESCO contract model, which can be useful in many situations The tendering phase contract model developed in the Eurocontract project features:

• The customer announces for the supplier commercial and juridical conditions, under which the contract is done

• It corresponds the contract program in a building contract • It is suitable for contracts in which also construction engineering is done in addition

with heating, plumbing and air conditioning work - if only some simple heating, plumbing and air conditioning work is done, the

contract model can and should be lightened • It guides what should be announced to the supplier and how it should be done The general ESCO contract features all the necessary information for ESCO contracting, including • The parties and general issues • Description of the energy saving measures and target savings • Schedule • Price, payments and savings deviating from the targets • Conditions of payment • Responsibilities of the parties • List of contract documents • Duration of the contract • Changes in the contract, transferring the contract • Disagreements and the legislation applied • Signatures

The tendering phase contract model is developed (mainly for municipalities) by the national energy agency Motiva as a part of the Eurocontract project. The general ESCO contract model is developed and used by a large builder, developer and company, and it is validated with their lawyers.

The general ESCO contract model has been applied successfully several times. There are currently no experiences of applying the tendering phase model. http://kesto.finbioenergy.fi/pu-benefs and the link “Sopimusmalleja/Contract models” on the left


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12.1 6.8 Contract models designed for Catalonia, Spain

In view of the results obtained and the characteristics of local authority contracting in Catalonia, different processes for introducing energy services are proposed: � Type of contract:

o Typical administrative contract:

� Advantages: • Regulated by Legislative Royal Decree 2/2000, approving the

revised text of the Public Administration Contract Law • Currently used by 99% of administrations

� The type proposed is a mixed supply and service contract enabling variable contract periods to be established.

� Nonetheless, given the high degree to which this mechanism has been developed in Catalonia, the possibility exists of beginning to introduce this type of contracting by establishing investment, management and guarantee clauses as part of existing supply and maintenance contracts.

o Private contract: Energy Performance Contract (EPC)

� This is not recommended, as it entails a change in the administration’s current contracting process, and energy services are already a new enough mechanism without adding new administrative complications.

� Contracting form:

o Contract:

� Guaranteed savings: recommended, because it is the company that is liable for both financial and technical risks

� Shared savings: not recommended, because, though the company is liable for technical risks, the administration is responsible for financial risk

o Mixed enterprise:

� Financial and technical risks are shared between the company and the administration, which also takes a share in the project.

� This form is often used in the case of a new work requiring operation, which is not the case with Sant Jaume d’Enveja Town Hall.

o Concession:

� Company liable for risks. � Generally used for long contract periods, this is not the case within this

study.


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The contract model for energy services proposed would have to follow the following structure:

I. General dispositions and conditions for contracting Object of the contract Legal framework Subject of the contract Period of contracting and extension User’s budget

II. Contents of the contract Obligations of the service supplier Obligations of the user Penalty clauses on both parties

III. Modification and termination of the contract Conditions for modifying the contract Conditions for terminating the contract

Annexes From the service supplier From the user

Main aspects to be considered are:

– Initial information – Guarantees of the parts and indicators to do its follow-up – Indexation of the energy price: annual, bianual, ... – Normative modifications during the period of contracting. – Buy of rights of emission of CO2 and in a future of NOx, who will pay them

The model was discussed and approved by the members of the advisory committee, on which both companies providing partial energy services and local authorities were represented. Suggestions made by participants at the various meetings were included in the project after study of their impact and assessment of the effect of their inclusion. Moreover, legal expert advice was obtained in order to precisely define the possibilities offered by the energy service contract. Regarding application, it is too early to assess this as present, as the Catalan local authorities that have begun to contract energy services for their buildings did not only over recent months, and there has as yet been no feedback. In order to promote and support local authorities beginning to consider contracting energy services in this way, a copy of the model contract has been posted on the ICAEN website, www.icaen.net, and we also plan to provide detailed, permanently-updated about this mechanism for increasing energy efficiency.


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6.9 Contract models designed for Upper Austria Based on the experiences of the Upper Austrian ECP projects implemented in the last years, ESV developed a guideline for model EPC contracts pointing out the crucial points to be taken into account and translated a “typical” EPC contract model into English. The model contract translated deals with an EPC project for the renovation of a school building, entered into between a municipality and an ESCO. The contract includes the following elements:

• general terms, aim of the contract • basics of the contract • scope of services and guarantee of the contractor • general duties of the client • other duties of the client • maintenance measures • baselines of energy costs, operating hours, room conditions and use • guaranteed energy cost savings • calculation of the amount of savings • remuneration • passing of the risk and the property • warranty • liability • duration of the contract, contract dates • subcontractors • operating and business secrets • cancellation of the contract • settlement of disputes • transfer and closure of the object • final provisions • appendix: technical part, scope of supply and services

The contract model is included on the CD-ROM which is available for free for everybody at ESV. The model contract translated was selected because it is a typical example of a well established ESCO and a municipality in the region. In the frame of the Upper Austrian support programme for EPC projects, this contract model was already checked and approved by ESV, who manages the programme. Moreover, this Upper Austrian support programme requires certain crucial points that have to be taken into account within a TPF/EPC contract. For a successful implementation of projects, it is necessary that the respective contract lays down rules for all relations between the client and the ESCO which are resulting from the project and including for example:

• explicit statement of the contract duration • What is to be done in the event of damage or loss (maintenance)? • What is to be done in the case of bankruptcy of a contracting party? • What is to be done if the designated use of the building changes? • Are there provisions for changes of energy prices foreseen? • Guaranteed energy savings and provisions for the allocation of guaranteed cost

savings as well as consequences if the guaranteed savings are not met • Passing the risk and the property • What is to be done if the building is sold?


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7. Tools for facilitating the replication of energy efficiency services

Having in mind the huge information lack within public bodies and particularly local authorities several tools were designed for the promotion of energy efficiency services. In order to facilitate the replication of the project and assist the local authorities to really implement energy efficiency services two tools were produced by each partner:

• A brochure with the results, explaining the specificity of public procurement in the field of energy services and including some of the best practices studied

• A CD-ROM with general information about energy efficiency, with the guidelines for

feasibility studies and the contract model(s) designed. In the following the detailed content of these tools are presented by each partner. There are also available on the partner’s web pages. An English version of the booklet with a general presentation of energy efficiency services and some best practices is available on the project gateway. 7.1 Tools conceived in Rhône-Alpes / France Booklet The booklet was drawn up to provide authorities and public corporations with the elements required to understand EES (energy efficiency services) and their implementation. It includes the following elements:

• Why use energy efficiency services? • What is an energy efficiency service? • What are the advantages of energy efficiency services?

What tools are available?

• The energy performance contract • The savings guarantee contract • Third party financing • Third party financing

How to implement ESSs A simplified diagram allows each party to identify where they are in relation to ESSs and what they can or must do. The different solutions: operating agreements with profit sharing, global contracts with investment and operation, public-private partnerships Examples of best practice

• Operating agreement with profit sharing (OPAC38) • Leasing for renovating wood energy plants (BRON) • Third party financing contract in hospitals (Italy) • Third party financing contract for public external lighting (Austria) • Third party financing contract for school heating (Germany) • Cogeneration in a district council (England) • Energy efficiency contract for a swimming pool (Finland)


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The European and national energy efficiency policy Available on http://www.service-energie.org/ CD ROM The CD ROM makes available all of the elements and tools established during the programme. The user-friendly and practical homepage provides direct access to the following elements:

• What is an energy efficiency service? • Why use energy efficiency services? • How to use energy efficiency services

A simplified diagram allows each party to identify where they are in relation to EESs and what they can or must do. It also provides direct access to study additional material, contract models, specification guides…).

• Examples of operating agreements with profit sharing and full guarantee • Examples of best practice (7 examples in France and Europe) • The Pubenefs programme • Booklet • Additional documents

- Reference guides, - Legislative texts - Training actions - Internet links

Available on http://www.raee.org/pubenefs_cdr/services.swf 7.2 Tools conceived in Modena / Italy The booklet produced and distributed in the Emilia-Romagna region, was conceived in order to inform Public Bodies and Local Authorities on the advantages offered by Energy Efficiency Services. After a general introduction, describing the Pu-Benefs aims and content, a deepened section on Energy Services in Italy and Europe, especially in relation to the Directive 2006/32/EC, follows. In order to show that many Public Bodies already concretely experienced, all over Europe and Italy, Energy Efficiency Services and contracts, 4 best practice cases (from Italy, Spain, Germany and Austria) are reported. The produced cd-rom deals with topics partly reported in the booklet and partly not. Specifically the content, all in Italian, as follows:

• presentation of the Pu-Benefs project; • Guidelines for the Feasibility Studies related to Energy Efficiency Services; • Abstract of the carried out Feasibility Studies within the EIE project; • EU Best Practices catalogue produced by the Pu-Benefs Consortium • Contract model and technical specifications.

These materials can be downloaded from the AESS website http://www.aess-modena.it/ section “Cosa Facciamo–PU-BENEFS”


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7.3 Tools conceived in Baden-Württemberg / Germany The booklet gives a brief overview on the definition of EPC and energy supply contracting. Also the proceedings of both contracting types are shown and explained. The positive aspects, especially the advantages and the motivation for a public authority to start an energy performance contracting project are discussed. FAQs which we have collected in our training seminars, during municipal council meetings and in discussions with members from public authorities are answered. The last chapter is showing some best- practice examples. These materials can be found on http://www.keabw.de/index.php?id=90 . 7.4 Tools conceived in United Kingdom Booklet Opening of energy markets and use of energy services represents a good opportunity for local authorities to include energy efficiency measures in their management, but several problems can occur, such as lack of knowledge of existing mechanisms, as third party financing, specificities inducing difficulties to implement energy services (legislation, accounting schemes etc), risk of losing the knowledge on the energy consumptions. The booklet intends to present good practice examples and tools available for public bodies. CD ROM It presents contract models. Contents List 1 / Why use energy efficiently 2 / European and national energy efficiency policy 2.1 / European policy 2.2 / UK policy 3 / Implementation of energy efficiency services 3.1 / Specificity of public bodies 3.2 / Tools available 3.3/ Ways to implement energy efficiency services 4/ Case studies 4.1/ Langdon Hills Housing Estate- Basildon 4.2/ Waltham Forest Town Hall 4.3/ Woking Borough Council 4.4/ Street lighting in Austria 4.5/ Hospital in Barcelona 4.6/ School in Germany About Thames Energy Limited These tools are available on the web page: www.lessenergy.co.uk\NELEEAC_energy_services_PU_BENEFS.htm .


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7.5 Tools conceived in South-East Sweden Booklet The Swedish booklet produced starts with an introduction to the PU-Benefs project and its overall objective to support the public sector in their striving towards increased energy efficiency and decreased environmental impact. The content is then divided in six chapters successively giving the reader more information about EPC and other Energy Efficiency Services as well as the practical, legal and financial aspects of their realisation: Chapter 1 Why use Energy Services

Chapter 2 What is Energy Services

Chapter 3 Decision process towards Energy Services and their conceptual logics

Chapter 4 Six case studies covering main public real estate types

Chapter 5 Project procurement and development process

Chapter 6 Energy efficiency in Europe and Sweden, - Energy Service Directive and different national initiatives

CD ROM The CD ROM produced is intended to serve as a complement to the brochure for those needing more information and templates for starting developing their own projects. Another objective is to put the concept of EPC and Energy Services in the context of the new Energy Service Directive by highlighting the expectations on the public sector to move ahead and serve as good examples. The content of the CD ROM is therefore composed of 5 chapters giving the reader both background, process guidelines and contract templates: Chapter 1 PDF-version of the PU-Benefs Brochure

Chapter 2 Power Point presentation of the 6-step procurement and development process

Chapter 3 Guideline for larger feasibility studies and development processes

Chapter 4 Four contract model templates

Chapter 5 The Energy Service Directive and it’s challenges for the public sector

The Swedish booklet and the content of the CD ROM can be downloaded from the webpage of the Swedish PU-Benefs partner Energy Agency for Southeast Sweden at www.energikontor-so.com.


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7.6 Tools conceived in Central Finland The booklet was designed after the drafts. Contents of the booklet:

- Why energy services?

- Energy policy and energy services

- Using energy services

- Tools (EPC, profit sharing, TPF, leasing)

- Implementing

- Energy service directive and municipal energy saving contracts

- Examples of energy services

- Enespa Oy: changing heating from oil to pellets

- YIT: City of Mikkeli office building

- YIT: Espoonlahti ice hockey hall

- YIT: Varissuo ice hockey hall

- ARE: Turku market hall

- ARE: Huurre Finland Oy industrial building

The CD-ROM includes the following:

- Presentations from the service providers

- Information about energy services, customer point of view, energy service directive, and PU-Benefs project

- Feasibility studies/energy audits

- Contract models

- Relevant links

- The booklet as a .pdf file

http://kesto.finbioenergy.fi/pu-benefs, links “Energiapalvelut –esite” and ”Energiapalvelut CD-ROM


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7.7 Tools conceived in Catalonia / Spain ICAEN has also been disseminating the Energy Services initiative among all sectors: industry, service companies, utilities, municipalities. We have carried out several types of spreading mechanisms as: internal communication with technicians of other Departments of Catalan government, information exchange with other communities, participation in national conferences, training seminars and specific conferences, as well as information to all municipalities who are interested in making an energy audit to implement energy saving measures. The main contributions have been: Publications

“Guía de Gestión energética” (Energy Management Guide in the public lighting) Published by: Dirección General de Indústria, Energía y Minas (Energy Spanish Government) Date of publication: 2006 Developed chapter: Saving electric power in the public lighting

Leaflet “SERVEIS ENERGETICS: Mecanisme d’estalvi energetic I economic per a les Administracions locals” Published by: ICAEN Date of publication: 2006

Web page

Dissemination strategies of Pu-Benefs have also been targeted to up-dating the information in the web page of ICAEN and giving personal information to other concerned actors in the sector of energy services contracts and the promotion of energy efficiency in buildings. See web page: http://www.icaen.net/pubenefs/index.htm


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7.8 Tools conceived in Upper Austria In this task a booklet in German language with the title "Energie-Contracting – Energieinvestitionen innovativ finanzieren" was developed in line with the specific situation in Upper Austria where already a number of EPC/TPF projects were implemented. The booklet has 16 pages in full colour, 4,000 copies were printed. The booklet contains general information on EPC and TPF, e.g. contract design, FAQ's, how to get subsidies in Upper Austria for EPC & TPF projects, etc. and also 8 best practice examples of Upper Austrian municipalities and companies which have already implemented such projects in public and company buildings. The booklet was disseminated in the frame of the dissemination workshop on 28 September 2006 and it was also sent to all 444 municipalities in Upper Austria and other important target groups like ESCOs, potential clients of such projects, etc. There is also the possibility to download the booklet from the project-website of O.Ö. Energiesparverband. A CD-ROM was developed to support the dissemination of ECP/TPF information which included the following documents:

- Round-table event 4 October 2005: programme, presentations

- Study tour 1 June 06: programme, handout, presentations

- "Contracting-Kongress" 28 September 06: programme, presentations

- Brochure "Energie-Contracting"

- Country specific report (German, English)

- Model contract

- Best practice examples "Gunskirchen", "Rosenbauer" (developed in WP2)

Both tools are presented on the website: http://www.esv.or.at/esv/index.php?id=1418&L=0 The booklet is available for download and the CD-ROM can be ordered for free at ESV.


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8. Conception of effective training seminars for public bodies and feed back by trainees

As it was stated already in the beginning the need for training is very high within the technical services of the public bodies. Therefore each partner organised at least on dedicated training seminar for technicians of the local authorities (e.g. departments of building management, public works, procurement etc.) and other interested persons and organisations. The training seminar was in general structured in the following way:

- Overview on framework conditions for implementation of energy services in public command

- Basics of performance contracting and energy service contracting for public partners

- Chances and pitfalls

- Best practice solutions for model contracts

- Project development and accountancy for contracting projects

With a view to optimise future seminars and also to receive feed back concerning the general appreciation of energy efficiency services and the implementation obstacles by the trainees questionnaires were distributed and the returned one analysed.

The main questions were covering the following major subjects:

• Comment on training session

• Enhanced value for the daily work of the technician/consultant

• Additional needs for information

• Opinion of good and necessary conditions to develop energy efficiency services


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8.1 Training seminar delivered in Rhône-Alpes (France) and

trainees feedback Date & location: 03 april and 22 may 2007 in LYON Organised by: RAEE Background & aim Energy efficiency services are not very common in France. Local authorities are still not adequately sensitive to energy saving issues and are not aware of the possibilities that can be obtained through Energy Efficiency Services. The training sessions were therefore of prime importance since they are the first level of awareness creation among operators. The target was technical services within local authorities and the objective was to show the advantage of EES and to encourage them to launch feasibility studies. To respond to this need, training sessions were carried out in two parts:

• In the morning there was an overall presentation of the Pubenefs programme, energy efficiency issues and the different types of energy efficiency services

• In the afternoon, concrete examples of the implementation of energy efficiency services (exploitation contract with guarantee, leasing, partnership contract)

The speakers were chosen on account of their expertise, their experience and their complementary skills in the EES sector: - One bank: FIP UNIFERGIE - ESCO’s: GIMELEC (association of ESCO’s) - One Consulting Firm: GIRUS - A law firm: Cabinet Merlin All technical services of local authorities in Rhone-Alps were invited. In the first training session, the maximum number of participants was reached very quickly and since there was still a significant demand, we decided to carry out a second training session one month later.


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Results, possible follow-up The content and format of the training sessions seem to have been well targeted since we had a total of over 40 participants in the two sessions (25 on 3 April and 19 on 22 May). These training sessions resulted in numerous exchanges:

• between trainers and participants who wanted details or additional information on EES in general or on concrete examples

• among participants since some already had some experience and others were discovering the subject

In term of outcome, the initiative was rewarding since the two training sessions have resulted in a new feasibility study (District Council of Montmélian) and several requests for assistance have been obtained to better understand the needs. (Community of District Councils of Portes de l’Isère, District Council of Vif, District Council of Echirolles) and have already resulted in two studies and many interesting contracts. The advisory committee has decided to renew these training sessions next semester. In addition, several additional demand points have been identified, particularly regarding the formulas for energy price indexation and these will be addressed at special sessions in autumn. Trainees feed back Number of completed questionnaires received: 13 People who completed the questionnaire represent participants at training sessions. These are, for more than half the participants, technicians providing advice to authorities with regard to energy management. Comment on the training session Participants are satisfied with the training received. The balance between theoretical presentations and concrete examples seems adapted to their requirements. No particular suggestions were made. Enhanced value for the daily work of the technician / consultant Because training sessions took place at the end of the programme, most of the participants have not yet had the chance to propose energy efficiency services. However, out of the 13 technicians who responded, 5 were able to propose an energy efficiency service i.e. nearly half, which clearly demonstrates the practical aspect of the training. The fact that no study has been launched following the proposals shows that even where some interest is shown, authorities are not ready to implement energy efficiency services. It seems that energy efficiency services are considered complex to implement (it is clear that it requires a significant change compared with current practices) and that authorities are anxious about subcontracting energy to private partners. An energy efficiency services study has been initiated by a participant as part of an energy audit. Additional needs for information Reference examples constitute the first additional requirement. It also seems, as we noted with Grand Roanne Agglomération, that assistance with launching and conducting feasibility studies is useful to authorities, at least the first time that they carry out the process. Comments on the brochure about energy efficiency services


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The brochure seems overall to respond effectively to participants’ requirements. On the whole, they consider it interesting and useful as a communication tool for elected officials. Your opinion on good and necessary conditions to develop energy efficiency services

• The need to raise awareness amongst local authorities is a priority in order to create demand (Information / training of local authorities / public bodies to create the demand).

• Awareness raising on energy management must be carried out globally in authorities

(Information / training to improve energy management in local authorities / public bodies as prerequisite for developing energy efficiency services)

• Participants also emphasize the need for more favourable general conditions (such

as a higher energy price). Finally, it appears that removing obstacles from the Procurement Contract Code is a desirable prerequisite for initiating development. (clear political support by having removed the obstacles in the public procurement procedures) . Setting up a quality management procedure for energy efficiency services, elaborating a guideline to follow from feasibility study till negotiation phase, setting up a clearing house for independent information and assistance to local authorities and facilitating, through subsidies, first energy efficiency services seem less important.


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8.2 Training seminar delivered in Emilia Romagna (Italy) and

trainees feedback Date & location: 1st March 2007, Bologna

Short description: The seminar was targeted to civil servants-technicians of the Public Bodies located within Modena and Bologna provinces. The main goal was to introduce or deepen elements related to innovative financial schemes for improving the energy efficiency of public buildings. Specific topics were developed during the 1 day long session: � framework on the conditions for the adoption of Energy Efficiency Services in the

public sector in Italy;

� the Feasibility Study as preliminary analysis tool for energy contracts

� basic elements of EPC and Energy Services in the public sector

� opportunities and obstacles

� the choice of the sound Energy Service contract

� solutions for contract models

� project development and budgets for contract projects

� best practices at national level

� market projections

Two trainers developed the several issues: Mr Marcello Antinucci (AESS Modena) and Mr Stefano Rugginenti (Local Authorities Energy consultant).


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Results, possible follow-up 17 people took part the seminar. Trainees feed back AESS got back 9 feedback questionnaires by the trainees. The results, on average figures, are annexed to the present document. Interesting especially the sections concerning the impact the training had on the daily work of the participant technicians. Among the 9 people, 5 had the opportunity to propose to their public body the implementation of energy efficiency services, while 4 did not still have any interesting opportunity. The same balance is respected with the following questions: only 1 Local Authority was interested and took action, 4 claimed to be interested but didn’t act and 4 did not gave any answer. The main reasons why the Public Bodies didn’t accept to resort to Energy Efficiency Services were the following:

• too complicated to put into practice (ex. baseline determination, several departments to get involved)

• cooperation/outsourcing with private partners (service provider) not accepted

• risk of conflicts with private service provider too high

What it is perceived as most needed in terms of information on energy efficiency services is ”more precisions and assistance for tendering procedure and more information and data on successful projects in my country/region”. As for the tools/information requested in order to effectively implement energy efficiency services, “Information / training” are considered as the first prerequisite for developing energy efficiency services in local authorities/public buildings. Another necessary condition to develop energy efficiency service is the “Information / training of local authorities / public bodies to create the demand”, while the third useful tool indicated by the participants is a “guideline to follow from feasibility study till the negotiation phase”. These data confirms the regional context is still pretty immature in the field of Energy Efficiency Services but, at the same time, the technical level of the public bodies showed to be quite aware on the conditions and tools needed in order to foster the dissemination all over the region of such contracts/financial schemes (not last one, the creation of a clearer support by the local politicians).


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8.3 Training seminar delivered in Baden-Württemberg (Germany)

and trainees feedback Date & location: May 8 2007 in Stuttgart Short description: After the surprising success of our first contracting congress in Stuttgart held in February 2006 in cooperation with the German Energy Agency DENA, KEA, the association of Baden Württembergs small and large scale municipal administrations (Gemeinde – and Städtetag) the planning for the next meeting started in December 2006. The work shop session should take place on the afternoon of the same day as the congress to avoid the costs and time for the participants from the municipal administrations. The work shop should give room for the spreading of very detailed information on the experience made in running EPC and Energy supply projects. After lunch the work shop session took place from 13h – 17h30. To keep all the participants active in the work shop 3 representative projects (Weil from the PU Benefs project together with Siemens, Mannheim together with MVV, and Nagold together with the energy supply contractor Gauß) were presented by the ESCO and the municipal representatives. Main tasks were: � Feasibility Studies: Experiences from IKEC project (municipal energy management)

were discussed. 2 of the communities started with no basic data, the other two of them had an energy management project already running in their buildings. Feasibility studies took only 30% of the time needed in those administrations which did not run an energy management project.

� Tendering proceeding: A lot of questions have been asked about the complex EU tendering proceeding. The timetable and the steps were shown and discussed. All speakers resumed that a two- step proceeding, first targeting a LOI for the EPC contract and second for the realisation of the energy saving and refurbishment measures may lead to the best results.

� Contractual matters: The experiences of the IKEC administrations showed, that the model contract (82 pages) used by KEA is a good base for an EPC but still needs a lot of explication before the start of the EPC project. Another administration, taking part in another EPC project reported, that they made unhappy experience with an ESCO EPC contract with only 9 pages. Difficulties aroused mainly in those parts of the contract which, in comparison to KEA model contract, does not foresee any helpful details on typical crucial points such as adjustments for verifying numbers of buildings users, utilisation hours etc.

Results, follow-up This kind of presentation gave both participants room to explain from their point of view the specific items, the positive and the problems which have been occurring in the project. This invited the other municipal representatives to start intense discussions which lead to a delay of the agenda of one hour but to an intensity of information transfer which never could have been taken place in a classic front desk presentation. At the end of the workshop at about 18h20, still over 80 municipal representatives were present, which is, in our perspective one of the best indicators for a successful event. We will repeat the congress and workshop in winter 2007/2008.


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Summary of trainees feed back In total 14 questionnaires have been received as feed back:

• Enhanced value for the daily work of the technician: 12 of 14 do see enhanced values when starting up a EPC or ESC project especially in the collection of basic data and information about the installations and weak points in their building stock. The experiences made with global benchmarks as a simple prequalification instrument were very much appreciated by the technical staff. Also the intention of KEA to enhance EPC or ESC projects not only focussing energy saving measures but also the refurbishment of the technical installations was understood and appreciated.

• Additional needs for information: All the feed back which we have received made

clear, that additional information is required. KEA has prepared a small questionnaire and sent it to the administrations. After having sent the required information back, KEA will make a proposal for on- site visits in some of their buildings. Some of the participants want model contracts that are provided in the booklet and on the CD-ROM.

• Opinion of the trainees on good and necessary conditions to develop energy

efficiency services: The general opinion is, that more information and workshop / seminars are needed to provide further details for specific building types such as hospitals and retirement home. KEA will provide a specific workshop for that in 2007/ 2008.


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8.4 Training seminar delivered in United Kingdom and trainees

feedback Date & location: 28th of September 2006 at London Remade Short description: The aim of the seminar was to identify the application of Energy Services to the installation and use of RES technologies. The seminar was attended by Local Authorities, Biomass boiler manufacturers, Consultants, Finance house, regional governments, bio-diesel producers, farmers and University Engineering student’s seminar. The idea was to create a forum for renewable energy technology suppliers; consultants and financiers to meet and discuss the application of their technologies to public sector buildings. The PU-BENEFS project was presented as part of the European projects run by Thames Energy Ltd. The emphasis was on the applicability of ESCOS as providers of finance, technical know how and risk takers on the application of new technologies. The follow up discussions were centred around the country specific report, the importance of accurate feasibility studies and benchmarking techniques. Results, possible follow-up In total 40 participants were registered. They came from different origins Local Authorities, finance houses, universities, energy agencies, consultants, farmers, bio-diesel producers. Theuniversity students felt that ESCOs should be incorporated in to the teaching curriculum. Other renewable technology suppliers agreed to promote the ESCO concept as part of their marketing strategies. Trainees feed back: Opinion on the enhanced value for the daily work: They felt that the work carried out in this area was limited to the experiences in the South East of the Country and consequently it did not extend to the whole country and therefore did not give a true reflection of activities across the UK. TEL noted that the exercise was carried out for the whole country and was a desktop exercise based on published information. It cannot therefore reflect unpublished or unreported projects. The participants were generally pleased at the level of information provided and welcomed the ESCO approach to enhance the value of the daily work of the public sector technical officers. Opinion concerning additional needs for information: The participants welcomed the training and discussions and suggested that the scope of the project should be widened to consider ESCO activities in transport and other forms of public and private sector housing improvements. They felt that there was dire need for additional information both in terms of technical information and also in terms of information relating to pit falls with ESCO performances Opinion of the trainees on good an necessary conditions to develop energy efficiency services: The participants generally felt that there was a lot more scope for developing energy services in the UK than is realised at the moment. They noted that the barriers were not so much technical but institutional – in terms of Local Authorities willingness to pass on control and responsibility for some of their important services. Finance was not so much an issue as the government was not considering relaxing the restrictions on Local Authority borrowing.


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8.5 Training seminar delivered in Southeast Sweden and trainees feedback

The cooperation between SALAR and EES derives from EES early ambitions to interlink the PU-Benefs project to the broader national energy service promotion efforts. Through this cooperation strategy has the PU-Benefs project been able to work with the National Energy Agency as well as SALAR and their regional members. Training seminar A successful training seminar was conducted on the 15th of May in Skövde Kulturhus in cooperation with SALAR, Swedish Association of Local Authorities and Regions. This seminar is a type of regional follow up of the national workshop held in Stockholm on the third of May. However, this seminar is more of a hands-on training and trouble shooting seminar aimed for operational decision makers, procurement responsible and other equal staff of local authorities and public real estate owners. The seminar had the same strategic framing during the morning session, even though the approach and examples was more training oriented and based on how to utilise the knowledge and the PU-Benefs material in the every day work for the targeted group of authorities and real estate companies. This means that also this seminar focused on the multiple challenges that local authorities and public real estate owners facing. Also the Energy Service Directive, The Directive on Energy Performance in Building and the new Swedish Building regulations was addressed. But they where all addressed out of practical training perspectives, on one hand dealing with the grate opportunities and the other hand the additional workload and recourse constrains that this development will add up on the actual organisations. Thereafter Energy Services, their conceptual logics as well as their procurement and project development aspect was dealt with during the entire afternoon. A key aim was to present the ESCO tool and the step by step procurement and development guide and Brochure/CD developed within PU-Benefs and the national Forum for Energy Services. In order to handle the reluctance from the procurement responsible an extensive discussion/explanation of the legal base for ESCO projects in the Public Procurement Act was included. Also the issue of third party financing and the somewhat non-nuanced fear for outsourcing was dealt with during the afternoon session. The seminar was finished off with some appreciated ESCO and EPC reference projects.


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Results, possible follow-up The interaction during the meeting was a bit fragmented, those who had heard about ESCO services before listened actively and had a lot of progressive questions, while others was somewhat passive. The step by step “talk through” of the entire Energy Service process from idea through feasibility studies and procurement to contracts, implementation and follow up, was very appreciated and the general guiding booklet as well as the attached power point presentation of the project development was well received. Summary of feedback from trainees General The feedback from the participants of the training session was relatively scanty, partly due to things being relatively new to them and their limited ESCO experienced. However the general attitude was positive, especially when focusing on how this ESCO tools actually can assist them in their daily work, meeting different national objectives for energy efficiency. But also some mistrust based on fear for outsourcing and lost of public sector jobs was expressed. Only seven sparely edited questionnaires was left after the session and three more was filled in by ESS after “telephone interviews” Enhanced value for technicians Since many of the technicians and O&M staff and also the operational management initially lacked information about energy services, or only having very vague ideas of their nature, the most obvious enhanced value was the very knowledge that the services existed and worked well. Another enhanced value according to the technicians was the credible presentation of how projects could be implemented without coming in conflict with the public procurement act. Several of those being a bit more experienced explained that when they earlier tried to propose this type of innovative structures to their procurement management, they were always turned down by the motivation that “It’s not applicable within the Public Procurement Act”. Therefore it was a grate enhanced value to actually having brochures and templates helping them in their internal work. Additional information need There was not much request for additional information; it would probably come as they move ahead with their internal work. Opinion of necessary conditions for project development In addition to the somewhat predictable wishes for more and higher state grants and subsidies, a general opinion was that we should have developed a special training seminar for regional and national politicians. Because without their interest and support it will be very difficult to develop more substantial energy service projects. In fact, addressing the political and policy making sphere of people might be the single most important condition for further project development.


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8.6 Training seminar delivered in Central Finland and trainees

feedback Date & location: October 11th 2006 in Jyväskylä Short description: During the project set-up phase a number of meetings were arranged with different stakeholders. During the project, there was constant stakeholder communication and information dissemination. To facilitate these actions and to further disseminate information, major seminar where energy services were introduced was held on October 11th 2006 in Jyväskylä, with 70 participants. Results, follow-up The program consisted of a general presentation of energy performance services by Jyväskylä Innovation, contractor YIT Building Services presentation regarding the available services, and presentation by a “happy customer”, Seinäjoki General Hospital, where energy performance contract was signed some ten years ago and performance throughout the contract period could be discussed. During the seminar local radio station had an interview of Asko Ojaniemi regarding energy savings measures. Trainees feed back The impacts of the training seminar were evaluated by using a questionnaire. The questionnaire was sent to the participants via e-mail, and also some interviews via telephone were made. Generally, the comments on the training session were very positive. The presentations, examples and the training in total were found good and useful. The quality of the speakers was also deemed good. The exchange with other participants and speakers was generally found useful. Training’s value for the daily work varied more. Many of the respondents had made some kind of proposals to local authorities and customers, with varying outcomes. Many of the customers were at least interested. The arguments mostly heard when energy efficiency services were not adopted were, that they are not adapted to the situation and needs, and that they are too complicated to put into practice. In the case of implementation, an energy audit was the most common way to proceed. Additional needs for information varied a lot. Most of them concerned concrete examples and success stories as marketing and information distribution material for energy efficiency services. Opinions on necessary conditions to develop energy efficiency services varied quite a lot. Mostly, political will and support, general conditions such as the energy price, and information/training for local authorities were seen as the most important issues.


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8.7 Training seminar delivered in Catalonia (Spain) and trainees

feed back Training seminar Date & location: 24th April 2007, Girona (Spain) Organised by:

• Institut Català d’Energia (ICAEN) • Consell Comarcal del Gironès (County Council of Girona) • Ajuntament de Salt (Municipality of Salt)

Short description: The training session organised on April 24 was aimed at informing local authorities in northern areas of Catalonia about energy services as a mechanism for energy and economic savings. The aim of the seminar was to explain both the energy service concept and its potential for saving energy and other resources, and structure of the model contract we are working with. The speakers at the training seminar were:

• Carles Basté, ICAEN: explanation of the energy service concept and the action taken by the Autonomous Government of Catalonia to promote the mechanism.

• Margarida Plana, Institut Cerdà: introduction of the model contract being developed in

the context of the Pu-Benefs project

• David Vila, Salt Local Authority: presentation of the local authority’s case study: from the feasibility studies carried out in 2006 under the Pu-Benefs project to the call for tender published and adjudicated in May this year for a further six local schools.

• Marc Carreras, Gassó: energy management service (EMS) as a crucial instrument for

energy service companies entering the local public sector.


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• Daniel Bennasar, Citelium Ibèrica: presentation of the company’s provision of energy services for public lighting in St. Boi de Llobregat (feasibility study carried out under the Pu-Benefs project) and St. Fost.

• Manel Roquetes, Energia i Serveis: presentation of case studies in the residential

sector, particularly in social housing blocks. Trainees feed back and conclusions In general the assistants were very satisfied with the technical session. According to the answers to the given questionnaire we can conclude:

• most of them were not informed yet about energy services

• this session has been very useful to technicians

• most of them will inform the local authorities in order to begin actions focused on saving energy through energy service contract

• they have the interest to assist to further workshops and seminars on this sector

• the given material has been very useful to them

• they consider local authorities and government should continue promoting energy services through training strategies (information is a key point)

• another key point is the framework conditions and the energy prices

• political support is necessary in any case (policy making and subsidies)


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8.8 Training seminar delivered in Upper Austria and trainees feed

back The objective of this WP is to provide tools to public bodies and local authorities allowing them to implement energy efficiency services. One tool is a specific training seminar. O.Ö. Energiesparverband divided this training seminar into two events. On 27 September 2005, a training seminar for municipalities with the title "retrofitting public buildings" was held in Traun. During this workshop, the possibility of financing projects with EPC was presented in detail and questions concerning this subject were discussed. More than 50 persons attended the seminar, many of them mayors or heads of the municipal administration.

Due to the already well developed EPC/TPF market in the public sector in Upper Austria, O.Ö. Energiesparverband focused on a new target group: organisations providing relief services. Similar to public bodies such welfare organisations as public, clerical and other social organisations have large building facilities to operate and face high energy costs, and also have a solid, long-term organisational structure (e.g. churches). A second training seminar was therefore organised on 4 October 2005 in Linz. The seminar "Energiekosten senken in Sozialeinrichtungen" ("reduction of energy costs in relief organisations") was attended by 47 persons.

In order to prepare the training seminar and to develop the programme according to the needs of relief organisations, 16 representatives of non-profit organisations, who are responsible for building issues, were interviewed in detail.


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The results of the interviews were included in the programme design. It turned out that most organisations had already some experiences with renewable energy sources and EPC/TPF, but there was great need for more precise information and especially best practice examples might be helpful in the dissemination of the EPC/TPF scheme. The programme therefore focused on the presentation of implemented EPC/TPF projects in social organisations which were presented by the respective ESCO and the person responsible in the organisation for energy matters. As a follow-up of the seminar, the participants were contacted again and offered advice and information on EPC/TPF. It turned out that many of the participants raised the wish to visit best practice examples. As a consequence, a study tour targeted at social organisations to visit best practice EPC/TPF examples in Upper Austria was organised on 1 June 2006. The following best practice ECP/TPF examples were selected and visited: energy performance contracting implemented in an old people’s home in Thalheim biomass heating plant in the monastery in Kremsmünster pellets heating plant installed in a municipality building in St. Marienkirchen At each site, the ESCO and the respective client gave a short overview of the project. Afterwards, there was enough time to raise questions and to discuss the experiences gained by the projects. In addition, a short seminar was organised after the tour, where the participants were informed about details on EPC/TPF and the Upper Austrian support programme for such projects. The main ESCOs in Upper Austria were present at the seminar and answered many questions.

The feed-back of the participants was very good. As most of them are already planning or considering an EPC/TPF project, they valued the opportunity to discuss their specific questions and concerns with different stakeholders. The study tour was attended by 15 participants.


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9. Successful implication of major key players in the project A special feature in this project was the cooperation with the different target groups and key players necessary for developing the market for energy efficiency services. They have been associated through a specific advisory committee, which tried to involve different sub-groups:

- local authorities

- public bodies

- banks, including specific ones for financing energy efficiency

- energy services companies and socio-professional associations

- others members depending on the local context The role of this committee was to accompany the different work phases of the project and give in input in order to improve the studies and tools produced. In addition vary valuable exchange took place between the participants concerning the problems and pitfalls of EPC but also the opportunities and the strength’s of this tool. All of the partners have seized this occasion to create a larger basis for EPC and reach a better of pertinence of the studies and tools produced. 9.1 Productive work with advisory committee in Rhône-Alpes

(France) Organisations that could be members of the advisory committee have been sought, and have been invited to all meetings. Participants were representatives from :

• the national and local energy agency,

• local authorities and county (city of Lyon, city of Montmelian, association of engineers of local authorities)

• the regional agency responsible for financing hospitals

• banks, including a state bank and investment banks specialised in local authorities and smaller companies ( Banque Populaire, FIP UNIFERGIE

• ESCOS and the regional union of the ESCOs (FG3E, ELYO, GIMELEC)

• the building companies’ union

• the regional council,

• the regional union of social housing companies

• departemental energy syndicate The first meeting of the advisory committee took place on October 11th, 2005. The European and national context for energy efficiency services and the project were presented, and an interesting discussion occurred about organisational and regulation problems, including the need to use new tools, such as the private-public partnership, to be able to implement energy efficiency services for public bodies. The local authorities pointed out the main problems, such as the difficulty in using these new tools, for internal and external reasons, and the lack of interest for these procedures. The second advisory committee meeting took place on March 30th, 2006. Several presentations have been made, including:


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• mechanisms of implementation of a leasing scheme, by a specialised bank • presentation of the first feasibility studies • presentation of the private public partnership procedure in progress on the hospital of

Roanne The third meeting took place on 6 March 2007. It was an opportunity to discuss and validate the content of the communication tools (brochure and CD ROM) of the final seminar and training sessions. Exchanges concerning contract models led to appointing a specialised consultancy to provide a legal overview of the contracts proposed. The presentation of a project underway for a partnership contract has allowed the stages of this new procedure to be fully understood. It has highlighted the constraints, advantages and limitations of its application. It seems that it can be applied for public external lighting from a critical size of approximately 10 000 lights. The last advisory committee, which was held on 27 June 2007, allowed the project to be assessed. Evidence from the two services implemented as part of the programme (Roanne hospital partnership contract and operating agreements with profit sharing and full guarantee of Grand Roanne Agglomération) has allowed the models proposed to be validated and opinions to be exchanged about their reproducibility and implementation conditions. Discussion on continuance of the programme reaffirmed the value of energy efficiency services and, according to difficulties encountered, allowed areas for development for the future to be proposed:

• Continue training by targeting several authority partners in order to set up conditions favourable to the emergence of projects:

• Operating agreements with performance guarantees

- Use the first projects as a basis for preparing a simplified guide to procedure and call for tender type documents

- Increase knowledge and reference material by holding topical meetings: price revision formulas except for tariff including both supply and delivery

- Ensure that EES solutions are systematically integrated into audits

- Provide guidance on some projects with willing authorities for operating agreements or public external lighting: Montmélian, CAPI…

• Partnership contracts

- Try to implement first projects, notably in public external lighting and establish a partnership with Gimelec (interest group of ESCO’s)

The advisory committee seems to be more of an interesting place to exchange opinions between members than a place to find ways to disseminate energy efficiency services.


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9.2 Productive work with advisory committee in Emilia-Romagna

Region (Italy) The PU-Benefs Advisory Committee met 4 times. As foreseen different stakeholder representatives were invited and among them as a whole did take part:

• 2 banks • 1 hospital • 2 public health service • 15 Municipalities • 1 Region • 3 Provinces • 2 ESCOs • 1 private consultant on energy issues • 1 social housing company • 1 consumers association • 1 national association of flats administrators

The minutes of the indicated advisory committee meetings are available on the AESS web site:

• 9th June 2005 • 13th December 2005 • 6th September 2006 • 7th March 2007

The 1st Advisory Committee meeting dealt with some Energy Service issues and on some specific content of the Country Report. In particular the meeting focussed on:

• the level of actual functionality/working out of the Ten Rules of Tax Department (in order to reduce VAT from 20 to 10%);

• how ESCOs are actually moving in the Italian context; • the selection of 2 public bodies in order to carry out feasibility studies.

The control of the heating power stations is usually in the manager’s hands, who can be tempted to increase instead of decrease the consumption. During the 1st meeting of the Pu-Benefs Advisory Committee the issue was debated and some proposals were put forward. During the 2nd meeting, the discussion mainly focussed on the Italian Technical Specifications to be provided to the other project’s partners (sharing saving scheme, formula adopted for the periodic invoicing to be reported, amount of CO2 reduction reached through the measures proposed to be indicated by the company within the call in order to promote a diffused shareholding system, etc).


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The 3rd meeting focussed on:

• presentation of the Feasibility Studies results • how to overcome hurdles in the Italian context for the implementation of EPC

contracts (main difference Europe-Italy: O&M activities by outsourced staff). • final proposal to be implemented: 1 contract divided in 2 main parts (1 on

ordinary Energy Service-Supply contract and 1 on energy saving measures) • difficulties, concerning Hospital buildings, in computing/measuring energy

saving (many several factors). The last and 4th meeting dealt with:

• Project’s dissemination deliverables • Training seminar results • Content and speakers to be identified for the final workshop to be held in

Bologna on the 3rd May. Working and debating barriers in our country with the Advisory Committee members was interesting as all the main stakeholders could share their view, especially on the main obstacles to the effective implementation of Energy Efficiency Services. The discussion between these main key players was pretty useful as, through these meetings, we came to the conclusion of trying to combine, in our regional context, an Energy Supply /Facility Contract (meter-based payment) with the basic elements of an Energy Performance Contract, aiming to identify an energy saving potential, achievable through measures both of technical content and related to user behaviour.


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9.3 Productive work with advisory committee in Baden-

Württemberg (Germany) The participants of the advisory committee in Baden-Württemberg were:

• Association of Cities and Towns Baden-Württemberg (Städtetag B.-W.) and Association of Municipalities Baden Württemberg (Gemeindetag B.-W.) mainly represented by the administration of Weil, Lörrach and Denzlingen.

• ESCO companies: ABB/GTE and Siemens BT. • Further irregular members: LBBW (Landesbank Baden Württemberg)

Three meetings were organised and an additional telephone conference. The market conditions in Baden-Württemberg region are already developed. With regard to this context the main items to be discussed within the advisory committee were contract matters and specific financial instruments (flat rate). Depending on the topics chosen, mainly the members of the public administrations Weil, Lörrach as well as the ESCOs were active. Representative from the banks did not join, but were informed about the results of the meetings. Additional items which were discussed are the possibilities to diminish the ESCO costs during the tendering proceeding by simplifying the tendering papers and the tendering procedure. Together with members from the advisory committee KEA successfully prepared an EPC conference with a workshop on May 8th 2007 targeted to public bodies. 9.4 Productive work with advisory committee in United Kingdom The advisory committee consisted of representatives from

• 6 Local Authorities • 1 Housing Association • 1 Regional Government • 2 Energy Services Companies • 2 Energy Agencies • 1 Commercial Bank • 1 CHP Trade Association

All the members of the steering committee were committed to the project although towards the end the bank became a little less interested. This was because the emphasis of the project changed from project financing to technical barriers for project implementation. In addition issues such as feasibility studies, benchmarking etc were of little interest to the bank. The four meetings held were led by a local authority representative and in a sense it was their meetings. The meetings were occasionally dominated by Brent and Waltham Forest Councils who had feasibility studies carried out in their public buildings. The format of the meetings followed the progress of the project and discussions therefore related to the feasibility studies, country reports, types of contracts and financing options etc.


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9.5 Productive work with advisory committee in Southeast Sweden Set up and work structure of the Advisory Committee As previously stated the task of gathering and getting get the attention and feedback from the Advisory Committee has been more difficult than initially expected. Not because the project being uninteresting, but due to the genuine shortage of time available among the limited number of stakeholders focusing on this task in Sweden. However, in order to get access to the right type of stakeholders we developed a constructive and recourse efficient way forward by integrate the mainly regional PU-Benefs project, into the broader national Energy Service initiative Forum for Energy services, promoted by the Swedish Energy Agency, and thereby we got access to and input from a variety of national key stakeholders. This structure has provided a progressive solution to interact with relevant stakeholders for the Advisory Committee. This slightly modified approach has resulted in a work structure composed of series of minor separate meetings and group meetings. Stakeholders involved are senior representatives from the ESCO-Industry, The National Association of Local Authorities and Regions, Regional Public Bodies, Public Real Estate companies and Regional Energy Agencies. In addition have also representatives from the Swedish Energy Agency and the Eurocontract project participating in what could be considered as a continuous “Advisory Committee Dialogue”. Within this work another challenge has been to attract direct involvement from the financial sector, especially since EPC- and third party financing etc. still has a limited usage in Sweden. However by including two of Sweden’s leading ESCO contractors in the group, we have also been able interact indirectly with the financing sector through the ESCO’s they provide financing for. Meetings and received input In total 9 meetings have been carried out from September 2005 to June 2007. The continuous dialogue approach has provided to be very valuable both in terms of structuring process guidelines and in terms of strategic positioning of the project and its efforts. Below has the received type of input been summarised in bullet points:

• How ESCO services would increase in value and take up activities if linked to the EPBD

• Key criteria’s for encouraging public bodies to carry out feasibility studies and EPC projects

• Best practice transfer from public bodies and ESCO’s in terms of procurement and contracts

• Public branch organisation and their members feedback on processes and contract design

• What financial (VAT) and accounting issues that needs to be tackled on a national level

• How the work and material should be focused in order to attract political interest and support

• How the work carried out could be used as input for State Public Inquiries regarding ESD


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9.6 Productive work with advisory committee in Finland The advisory committee was set up to have different players from local authorities, public bodies, banks and financing, and energy service companies:

• City of Jyväskylä facility management;

• Central Finland hospital district;

• Jyväskylä Rural Municipality facility management;

• Senate Properties (governmental facility manager)

• Motiva (the national energy agency, Eurocontract partner);

• YIT Kiinteistötekniikka Oy (large facility developer/manager doing EPCs);

• ARE (large facility developer/manager doing EPCs);

• Vattenfall (Energy and ESCO company)

• Finnvera (Special financing)

• Osuuspankki (bank)

• Ympäristökeskus (regional environmental official, housing) There were four meetings arranged together with different other events. During the meetings, following issues were discussed: general issues about energy services and their situation in Finland; information about the PU-Benefs project, how the project can support in implementing energy services, possible targets for energy services and feasibility studies and possible new areas for energy savings; applying the contracts. Productive input included experiences both from customers and suppliers in using energy services; feedback and information, best practice and other examples, contract models, description of the business situation in Finland.


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9.7 Productive work with advisory committee in Catalonia (Spain) 1st Advisory Committee Meeting Date and place: 11th May 2006, Institut Cerdà, in the center of Barcelona. Main objectives: The objectives of the meeting were to present and put in common the energy services as a mechanism of savings at a municipality level and to stimulate the implementation of the energy services in Catalonia of real experiences. Participants: limited invitations, > 30 people assisting (local and regional administrations, ESCOs, financial entities). Companies:

Gas Natural, Endesa, Iberdrola, Unió Fenosa, Cepsa Elyo, Dalkia, Moseca Energia i Serveis, Icogen Institut Cerdà

Banks: La Caixa, BBVA Administrations: ICAEN, Efiensa, Municipalities Presentations:

Presentation: Objectives and Planning: Mrs Cristina Castells Guiu, Head of the Energy Efficiency Area at ICAEN The energy services in the Catalan policy and, specifically, framing its development as key line of the Catalonia Energy Plan 2006-2015. Strong and weak points of the concept of energy service. Presentation of the type of the energy services concept: Institut Cerdà Definition of energy services. Agents of the market. Situation in Catalonia and legal frame. The applicability and adaptability of the mechanism. Presentation cases studied from WP3. Real cases: Giroa (Dalkia International Group). Real cases, energy services applied to public buildings. Presentation of the contract of ‘energy management and maintenance with total guarantee’ signed with the Victoria municipality. Real cases: extension of the maintenance contract Energia, Serveis I Noves Tecnologies (Distec Group)t Real cases, energy services applied to residential and commercial buildings Main outcomes:

• The scope of the Energy Service: not always data available, applicability to the rehabilitation

• Economical & administrative procedure: payment of the audit • Aspects to be considered in the contract: indexation of the energy price, normative

modifications, buys of emissions rights… • The role for the Catalan energy administrations: promotion, coordination, information • The role for the local administrations: implication, guaranteeing of payment…


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2d Advisory Committee Meeting Date and place: 16th October 2006, Sala Cotxeres del Palau Robert, in the center of Barcelona. Main objectives:

• Present and discuss the structure and the main contents that a contract for energy services should include.

• Promote the contractual procedure for energy services in Catalonia based on contracting models

Participants: limited invitations, > 30 people assisting. Companies: Gas Natural, Endesa, Iberdrola, Unió Fenosa, Cepsa, Elyo, Dalkia, Moseca, Energia i Serveis, Icogen, Institut Cerdà Banks: La Caixa, BBVA Administrations: Efiensa, ICAEN, The municipalities of Salt and St. Boi Llobregat Presentations: Objectives and Planning Mrs Cristina Castells Guiu. Head of the Energy Efficiency Area at ICAEN. • The energy policy

- In Europe: European committee for energy services - In Catalonia: Objective for the Energy Plan in Catalonia for 2006-2015. Energy

Services as a key point of the Energy Plan to promote the energy efficiency and as an opportunity for the municipalities.

- Consumption at the municipalities. Interest from the Catalan Government to implement energy efficiency within the municipalities.

Energy services: areas of work that are being developed by ICAEN. Interest from the Catalan government to help the municipalities and industries that are willing to implement these types of mechanisms. Presentation of the type of contract for energy services Mrs Margarida Plana i Turró. Project manager of the Energy Area at the Institut Cerdà.

- The model contract for energy services as a tool to boost the market. - Proposal for a structure of the model contract - Basic contents that the model should include

Real cases: extension of the contract for supplies Mr Juan Rentero. Responsible for the Centre of Energy Efficiency at Unión Fenosa.

• Energy efficiency as an added value service at Unión Fenosa: positioning of the company

• Development of products and services. “Immediate possession” projects. • Results obtained in diagnostics and audits • Obstacles for added value services in energy efficiency

Real cases: extension of the maintenance contract Mrs Carmen Ruiz. Head of the service Area at the municipality of St. Boi de Llobregat

• Experience of the municipality of St. Boi in projects involving energy services with the Institut Cerdà

• Initiative to extend maintenance with maintenance and investment provisions


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Main outcomes: • Lack of basic data regarding a necessary base for a proposal of energy services.

Who should carry out the audit? Who should pay for it? • Proposal for the creation of the energy auditor figure • Updating the price of energy during the contracting period. • Debate over the objective of energy services: results or facts? Contractual

obligations in relation with each of the interpretations. The contractual nature of the investment and maintenance plan wasn’t defined due to a difference in opinions as to whether the contract is based on results or process.

• The concept of total guarantee is clearly stated in the contract. It contains the concept that includes investments and maintenance of the installations during the contracting period. Total guarantee can represent 10% of the contract’s cost of the contract.

• The technical conditions of the contract have to be very detailed in order to avoid big differences between the offers.

• The role of the banks is important at this stage during the implementation phase of the energy services.

3rd Advisory Committee Meeting Date and place: 22th June 2007, Col.legi d’Enginyers Tècnics de Catalunya, in the centre of Barcelona. Main objectives: Summarize the main themes of the project Participants: > 80 people assisting. Companies: Gas Natural, Endesa, Unió Fenosa, Aigrene Energia, Biomassa energia, Energetics, ENG Energia I REsidus, ENT Medi Ambient I Gestió, FCC Medio AMbiente, Elyo, Dalkia, Citelium Iberica, Serveis Integrals de Manteniment Rubatec Energia i Serveis, Icogen, Applus, Frigicoll, Gassó, Honeywell, ISTEM, La Vola, Oficina Ingeniería Industrial Aiguasol, CETIB, CITCEA Tremoledas&Simon Advocats Institut Cerdà Banks: La Caixa, BBVA Administrations: Efiensa, ICAEN Municipalities Energy local agencies Consell comarcal del Gironès Diputació de Barcelona Presentations:

Presentation of the main conclusions of the project Mrs Margarida Plana i Turró Project manager of the Energy Area at the Institut Cerdà


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9.8 Productive work with advisory committee in Upper Austria O.Ö. Energiesparverband had a first meeting on 11 March 2005 in its office in Linz, discussing mostly how to create new markets for biomass projects and how to use the EPC scheme. 16 persons took part in this meeting, among them five energy service provider companies (ESCOs), several energy consultants and representatives from companies offering biomass products. In addition, detailed discussions were held with energy service provider companies (ESCOs). Individual meetings were organised with each of the four most important ESCOs where current market opportunities and barriers, as well as collective and individual promotion activities were discussed. The second meeting of the advisory committee was held in the frame of the seminar "Energiekosten senken in Sozialeinrichtungen" ("reduction of energy costs in relief organisations"), which was organised on 4 October 2005. 7 persons attended the meeting, comprising 3 ESCOS, 2 clients of EPC projects, a pellets boiler producer and representatives of the regional administration. The discussion mainly focused on how the market for EPC projects and especially social organisations could be supported to trigger EPC/TPF projects. The third meeting of the advisory committee was held in the frame of the information event "Solar & Pellets-Trends: Informationsveranstaltung für Installateure" ("solar & pellets trends: information event for installers"), which was organised on 18 November 2005. The advisory committee focused on the possibilities to interest the target group of installers in EPC. The fourth meeting of the advisory committee was held in the frame of the event "Energie-Contracting für Sozialeinrichtungen" ("EPC/TPF for social organisations"), which was organised on 1 June 2006 in combination with a site-visit. 15 persons attended the meeting, including ESCOS, potential clients of EPC projects, representatives of the regional administration and of different social organisations. The discussion mainly focused on how the market for EPC projects and especially social organisations could be supported to trigger EPC/TPF projects. The fifth meeting of the advisory committee was held in the frame of the regional workshop on 28 September 2006 in Linz. It was attended by 17 participants, including ESCOs, energy consultants, representatives of regional administration with experience in TPF-project implementation. The discussion mainly focused on how the market for ECP/TPF projects could be supported to trigger actual project implementation. As a specialised lawyer attended the meeting, the "typical" contract design, practical problems and solutions were discussed.


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10. Efficient dissemination by targeted workshops The main purpose of this project is to increase the number of public bodies using energy efficiency services. The obtained results in the different tasks have been made available and disseminated with a view to encourage the target groups to follow the shown examples and implement energy efficiency services. One very effective dissemination means is the organisation of work shop targeted to an audience of professionals including elected officials, civil servants, technical consultants, ESCOs, banks etc. So in all the partner regions and countries dissemination workshops on “Energy efficiency services in public buildings” have been organised. The content and the outcome of these work shops are presented in the following. In addition a European seminar was organised in cooperation with the FEDARENE, the European Federation for Regional Energy and Environment Agencies and the Committee of the Region in Brussels. 10.1 Dissemination workshop organised in Rhône-Alpes (France) The objective of this seminar was to raise awareness amongst elected officials by showing them the importance of having a real energy policy and the place of energy efficiency services in this regard, especially as a means of gathering necessary financial means. The day was organised in three stages: • A summary of the stakes relating to energy management • A general presentation of the Pu-benefs programme and the different types of energy

efficiency services • Concrete examples of applying energy efficiency services

- partnership contracts of authorities in Germany - municipal energy policy with an energy service - operating and maintenance agreement with profit sharing and guarantee for a local

authority and a social housing company - partnership contract for public external lighting - energy management service in district councils set up by an energy syndicate - promoting energy efficiency in schools, by the region

Speakers were chosen for their exemplary nature and in order to be able to show the entire range of application of energy efficiency services in a concrete way. The day was first and foremost directed at those elected officials who wish to initiate or improve an energy efficiency policy but also concerned service managers who must be involved. The seminar brought together almost 60 participants. The variety of presentations allowed everyone to find some elements to take action. The seminar complemented the training programme very well and raised awareness amongst elected officials in addition to engineering and design departments. This model shall be able to be reproduced in a decentralised way in interested provinces (departments) in order to approach elected officials.


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10.2 Dissemination workshop organised in Emilia-Romagna Region (Italy)

Date & location: May 3rd 2007, Bologna Fair District Short description: The workshop - addressed to ESCOs, technicians and politicians from Public Bodies, banks – aimed at presenting good practice examples and effective tools available for Public Bodies. Furthermore its objective was to point it out the obstacles making difficult nowadays the implementation of innovative financial models and schemes in order to promote and foster the energy efficiency in buildings, meeting the Public Bodies needs and making easier the ESCOs work. Results Roughly 50 people participate in the workshop session. The interest from the people participating was high even if, in the next future, many discussed topics deserve to be deepened. Programme of the work shop 15,00 Economy Department Emilia-Romagna Region

Welcome Energy Services: Public Bodies practices, research activities and consultancy

15,10 Marcello Antinucci – Energy and Sustainable Development Agency of Modena (AESS) Practices of Energy Services implemented by AESS and PU-Benefs project

15,25 Ernesto Bottazzi – Public Works Department – Modena Province The Energy Service experience of the Modena Province

15,40 Paolo Fontana – Councillor on Environment Sustainability Policies – Formigine Municipality The Energy Service experience of the Formigine Municipality

15,55 Marco Corradi - President Reggio Emilia ACER ACER (Housing Company Emilia-Romagna) experience and role

16,10 Mariella Melchiorri – Cooperative Institute for Innovation Research activities on innovative financial schemes

16,25 Renato Cremonesi – Cremonesi Consultancy Energy Efficiency: ESCO’s role, energy audits and Energy Service contracts Energy Services: ESCOs’ practices

16,40 Roberto Loschi – CPL CPL experience

16,50 Domenico Russo – Cofathec Examples of energy efficiency in the public sector through ESCOs and Energy Efficiency Certificates

17,00 Alberto Portugalli – Siram Example of energy saving within an Energy Service management Energy Services: Banks’ practices

17,10 Fabio Faina – Banca Etica Financing projects implemented by Banca Etica in the energy sector framework: Progetto Energia and Innesco

17,20 Enzo Colombo – Banca Intesa San Paolo Banca Intesa San Paolo practice


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10.3 Dissemination workshop organised in Germany After the surprising success of our first contracting congress in Stuttgart held in February 2006 in cooperation with the German Energy Agency DENA, KEA, the association of Baden Württembergs small and large scale municipal administrations (Gemeinde – and Städtetag) started the planning for the next meeting in December 2006. The results of the last meeting in 2006 were taken as a reference to organize a contracting conference and a workshop session in Stuttgart on 8th May 2007. The work started in the last meeting of the advisory committee in December 2006 where the participants from both sides of the market started to sample ideas on the main topics of the congress and the workshop session. Very soon the agenda was generated and KEA started to organize this main event. The main targets are public bodies, and the intention of the congress was to give an overview on the state of the art in our regional energy market. The work shop session should take place on the afternoon of the same day as the congress to avoid the costs and time for the participants from the municipal administrations. The work shop should give room for the spreading of very detailed information on the experience made in running EPC and Energy supply projects. The invitations send by KEA to all municipal administrations had an over average feed back: over 130 participants (from 1.100 municipalities in Baden Württemberg). The agenda of the congress was: Introduction by Dr. Steeger, Chairman of Baden Württembergs Städtetag Short introduction on the topics foreseen by KEA Dr. Kienzlen Energy management- report on KEAs experience on the implementation of Energy management as a structured non investive optimization activity to lead public authorities to energy savings of at least 10% and an energy report also reflecting energy saving investments. This report was done by KEAs head of the Energy management department Claus Greiser. The main impact was to show the proceedings of an internal or external supported Energy Management in public buildings. The frequent controlling of the energy consumption, the optimization of the control gear and the frequent support of the operating personal has been proving the main key success points. The average energy saving, climate corrections already applied, showed savings up to 20% heating energy, 30% water consumption and up to 5% electricity consumption without any notable investments. From Energy Management to EPC: the presentation done by head of energy management section Rüdiger Lohse, pointed out that EM is a very helpful source for data and information to prepare EPC projects. The basic information collected in the EM project is consumption and information data on the existing energy consuming installations in all public buildings of a municipality. The annual evaluation of the weak points and technical solutions to retrofit these weak points are very helpful to evaluate the potential for EPC in the public buildings of a municipality which normally do not exist.


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The presentation also pointed out, that unfortunately the approach of average municipalities does not provide any qualified information on the public buildings. Municipalities only react, if any fundamental problems are already undeniably on the door step and make it difficult to develop a strategy for the energy saving investments in total. The “project development by panic attack” could be avoided when EM is in work. Also important is the perspective (which reflects one of the basic fears of municipalities) that when an EPC is started on an existing EM project, the contracting company does not only earn the easy fruit from the optimization of existing equipment but has to do well planned investments to be successful. The lunch break gave the participants opportunity to visit the ESCO companies on their stands and get some personal contacts. After lunch the work shop session took place from 13h till 17h30. To keep all the participants active in the work shop 3 representative projects (Weil from the PU Benefs project together with Siemens, Mannheim together with MVV, and Nagold together with the energy supply contractor Gauß) were presented by the ESCO and the municipal representatives. This kind of presentation gave both participants room to explain from their point of view the specific items, the positive and the problems which have been occurring in the project. This invited the other municipal representatives to start intense discussions which lead to a delay of the agenda of one hour but to an intensity of information transfer which never could have been taken place in a classic front desk presentation. At the end of the workshop at about 18h20, still over 80 municipal representatives were present, which is, in our perspective one of the best indicators for a successful event.


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10.4 Dissemination workshop organised in United Kingdom Date & location: 27th of June 2007 at the London Metropolitan University, London Short description Workshop was titled: Realising the Potential for Energy Savings in Public Sector Organisations. The objective of the workshop was to disseminate the outcomes of PU-BENEFS project and to communicate to public sector managers the potential of using ESCOs’ to improve the delivery of energy efficiency services. The aim of the work shop was to increase the level of awareness of the benefits of ESCO in tackling the wider issues of climate change and global warming. Results, follow-up This workshop, attended by 52 people, was very well received. In general, local authorities’ representatives and other public sector staff have learnt a lot about the ESCO approach, what kind of contracts formats are feasible, and what the financing options are. After the workshop, contacts for future energy efficiency work with Brent Council and COI have been made.


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10.5 Dissemination workshop organised in Sweden A successful dissemination workshop was conducted on the 3rd of May at Finlandshuset in Stockholm in cooperation with SALAR, Swedish Association of Local Authorities and Regions. The cooperation between SALAR and EES derives from EES early ambitions to interlink the PU-Benefs project to the broader national energy service promotion efforts. Through this cooperation strategy has the PU-Benefs project been able to work with the National Energy Agency as well as SALAR and their regional members. The background and the aim for this conference/workshop was to highlight the strategic, environmental and not the least the economical benefits of using ESCO services as a cost efficient implementation tool in public buildings. The workshop based its work on the multiple challenges that’s laying ahead for the public real estate owners. The so called Energy Service Directive, The Directive on Energy Performance in Building and also new Swedish Building regulations will all together put considerable demands of energy efficiency investments in the public sector. Since all these investments can’t be handled and financed by the public real estate owners themselves, the concept of Energy Services and particularly EPC, Energy Performance Contracting was presented together with national examples from the PU-Benefs project and other initiatives. A very important aim was to present strategies for how to deal with large energy efficiency projects from a political, an internal management and an operational and maintenance perspective. The key point was to explain that the ESCO services and EPC doesn’t impose a threat to the public organisations. It rather represents a new possibility to capacity building and increased recourses. Results, follow-up The interaction during the meeting was good and the majority of the audience was even more positive to ESCO services than expected. The two most valuable key success factors seem to have been;

• To link ESCO services to the national and European development as well as the broad challenges of the Public real estate sector, and not only present is as an energy efficiency tool, had a very positive effect on managers as well as other decision makers.

• To be able to present a variety of reference cases of different size and focus dramatically increased the credibility of the ESCO model.

But even if the general feedback was positive, we also realised that we must do more in explaining and finding good and optimised interfaces between the ESCO projects and the public real estate companies own/other operations. There is a genuine reluctance among some of the operation and maintenance organisations, based on a combination of their fear for outsourcing and a somewhat protectionist approach.


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10.6 Dissemination workshop organised in Finland During the project set-up phase a number of meetings were arranged with different stakeholders. During the project, there was constant stakeholder communication and information dissemination. To facilitate these actions and to further disseminate information, major seminar where energy services were introduced was held on October 11th 2006 in Jyväskylä, with 70 participants. Results, follow-up The program consisted of a general presentation of energy performance services by Jyväskylä Innovation, contractor YIT Building Services presentation regarding the available services, and presentation by a “happy customer”, Seinäjoki General Hospital, where energy performance contract was signed some ten years ago and performance throughout the contract period could be discussed. During the seminar local radio station had an interview of Asko Ojaniemi, the Finnish project manager, regarding energy savings measures. Workshop agenda Asko Ojaniemi, Energy services in general

• Experiences from other countries • PU-Benefs project • Project’s possibilities to help interested parties

Kalevi Hyvärinen, YIT

• YIT: energy services, contract models and references Risto Linqvist, South-Ostrobothnia hospital district: Customer’s view Seinäjoki Central Hospital EPC


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10.7 Dissemination workshop organised in Catalonia (Spain) FINAL NATIONAL SEMINAR Date: 22 June 2007 Place: Barcelona Association of Technical Industrial Engineers (CETIB) Welcome: Manel Nicolás, Barcelona College of Technical Industrial Engineers Opening address: Encarna Baras, ICAEN Director General Round table 1: District heating. Moderator: Margarida Plana, Director of Projects, Energy Area, Institut Cerdà

• Josep Massanella, Energy consultant to Cornellà de Terri Local Authority • Carme Puig, Molins de Rei Local Authority; Xavier Gil, Biomass energy manager

Round table 2: Energy services in municipally managed buildings. Moderator: Carles Basté, ICAEN technician

• David Vila, Urban Planning Advisor, Salt Local Authority • Víctor Martínez, Head of Urban Maintenance Service, St. Cugat Local Authority

Round table 1: Energy management in public lighting. Moderator: Carles Basté, ICAEN technician

• Carme Ruiz, Head of City Services, Sant Boi de Llobregat • Blanca Atienza, Manager, municipal services and public way maintenance,

l’Hospitalet Local Authority Closing debate on energy services as a solution for municipal energy challenges Presentation of Advisory committee conclusions by Margarida Plana, Director of Projects, Energy Area, Institut Cerdà Comments and questions of participants Participants welcomed the presentation of case studies illustrating the practical application of the system, as this enabled

• Its advantages to be described by actual users • The identification of problems or difficulties encountered in the process of planning,

introducing, contracting or operating services, and description of how these were resolved.

Other issues discussed at the seminar included:

• How and from whom initiatives emerged. • Barriers encountered: social, economic, political… • Options for formulating call for tender:

- Establishing minimum investment or minimum measures in the specifications - Establishing the total budget and allowing freedom as regards investment

• Performance of systems operating - Benefits - Associated investment - Maintenance - Energy costs

• Regarding the contract, interest was shown in the clauses - Assuring guarantees - On changing energy prices


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10.8 Dissemination workshop organised in Upper Austria The dissemination workshop "Contracting-Kongress – Energie-Investitionen innovativ finanzieren" was organised on 28 September 2006. 10,000 copies of the programme folder were printed and disseminated. 200 participants, among them ESCOs, municipalities, SMEs, etc. took part in the workshop. The focus was on the successful implementation of EPC/TPF-projects, the discussion of success factors and barriers as well as on the main requirements of a model contract. Also best practice examples where presented. The programme included among others the following presentations:

• Presentation of successfully implemented EPC/TPF projects in Upper Austria • View on the market opportunities offered by energy services • Overview of the most efficient technologies used in EPC/TPF projects • Main important points of the contract between the ESCO and the client • Best practice examples from Germany and Switzerland

Also a round-table discussion including the main ESCOs active in Upper Austria and representatives of best practice projects implemented in the last years in our region was held during the workshop. In the afternoon, a site-visit to two best practice examples in Upper Austria was organised for the participants of the dissemination workshop. A biomass heating plant for a monastery in Kremsmünster financed by EPC/TPF and the municipality of Marchtrenk which financed the renovation of the street lighting and also of several public buildings by EPC/TPF were visited. During the dissemination workshop a "market place" was organised where the ESCOs active in Upper Austria presented their services. During the event, the participants were asked to fill in a questionnaire answering the following questions:

• TPF projects are considered / not considered in the future (if yes, which kind) • services and products in the range of energy efficiency and renewable energy

sources are offered (if yes, which kind) • interest in and need for energy advice

30 persons filled in the questionnaire, 12 participants expressed a specific interest in a TPF project, mainly concerning retrofitting of building, modernization of street lighting or the installation of a pellets boiler. 17 persons answered the second question with yes, they are delivering for example services /products in the field of third party financing, solar energy, biomass heating and heat pumps. Several persons concretely asked for an energy advice. Around the seminar, media and PR activities were made, resulting in several newspaper articles. A review of the event is available on the project website of O.Ö. Energiesparverband.


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10.9 European dissemination seminar In cooperation with FEDARENE (European Federation of Regional Energy and Environment Agencies) the Committee of the Regions has been involved in the PU-BENEFS action through hosting the European seminar. In addition one representative from the DG TREN and one from the EACI participated. It was dedicated to insist again on the role of local authorities, the energy saving potential within this sector, the necessity of establishing a good energy management and presenting the implementation oriented results and outputs by the partners of the PU-BENEFS action. The seminar was a great success with more than 150 persons registered. Following the seminar dedicated web page on the site of FEDARENE was set up. It gathers the updated interventions and the conclusions of the Pu-Benefs Seminar. The proceedings and the recording of the conference are available on the website: (http://www.fedarene.org/events/Fedarene_events/2007-06-20/CoR-Seminar_20-6-2007.htm).


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11. Lessons learnt concerning barriers and opportunities for

developing EES During the 30 months of the project duration all the partners were very much involved to promote energy efficiency services for the public bodies and local authorities within the territory covered. This presence in the field is very valuable and gives a good opportunity to draw lessons. The project partners were solicited to organise the lessons learnt according to the following plan. The major barriers and shortfalls will be identified, but also the measures to be taken to overcome these barriers.

• Barriers, shortfalls

- Legal framework (public procurement procedure etc.)

- Information deficit

- Internal competence of public bodies

- Sufficient ESCO, technical consultants

- Financial restrictions

- Missing normalisation and standardisation

- Political support

- Missing facilitators for local authorities

• Measures needed to improve : In the following every partner has drawn up his lessons learnt. At the end a synthesis is presented limited by the diversity of the players and frame conditions in the partner countries and regions.


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11.1 Lessons learnt in Rhône-Alpes, France Barriers, shortfalls Legal framework (public procurement procedure etc.) In France, the Procurement Contract Code makes it compulsory to separate investments and operating costs for any equipment, and prohibits the use of operating costs as part payment for investments. It is therefore not easy to set up energy efficiency services including the investment. Since 2004, a decree has authorised public-private partnership contracts which must allow the creation of contracts incorporating the investment. However, application conditions are limited (urgency or complexity and proven economic benefit) and the procedure is complex. For the time being, the only energy efficiency contracts that exist concern public external lighting. In this context, the main energy efficiency services that can be implemented by authorities are O&M contracts with profit sharing and guaranteed results. The authority can then, based on guaranteed savings, use leasing to finance its investments. Information deficit and internal competence of public bodies Authorities are not yet sufficiently familiar with the stakes relating to energy saving and are not aware of the possibilities offered by energy efficiency services. This information deficit is very apparent in the answers provided in the questionnaire, issued after training sessions, and indicate not only the need for awareness raising/training regarding energy efficiency services but in a broader sense in relation to stakes and means of managing energy in authorities. Many authorities also think that using an EES results in a loss of control on the part of the public corporation in favour of the private partner and are worried about this. Only customised information will allow this preconception to be changed. Sufficient ESCO, technical consultants In the absence of demand, the energy efficiency services offered by Esco’s are quite limited. Missing facilitators for local authorities It has clearly emerged from advisory committee discussions and training questionnaires that authorities require support for implementing energy efficiency services. However, this support requirement does not seem to require, in the short term, a specific structure to be set up. Measures needed to improve Communication French authorities are not sufficiently aware of the stakes, potentials and possibilities of energy management in their building stock and awareness raising/training must be made a priority. Participation at meetings on energy management organised by other organisations in district councils is an interesting vehicle for communication. It allows EESs to be presented as a tool, amongst others, for developing an energy management policy. The limitation of these actions is the limited number of participants. It will be necessary, in future, to scale down this action by ensuring that other information and advisory bodies also promote EESs. We must also, in future, develop articles in papers aimed at authorities in order to present supported successful examples implemented as part of the programme to guarantee that the


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maximum number of concrete presentations reach authorities. Several contacts have been made in this direction in June. It is necessary to continue training by targeting several partners of authorities in order to create conditions favourable to the emergence of projects (economic conditions not being sufficient, it will be necessary to use the combined leverages of the environment and cost saving in order to develop EESs) Support For O&M contracts with performance guarantees:

• Prepare a simplified guide to procedure and call for tender type documents • Ensure that EES solutions are systematically integrated into audits • Provide guidance on some projects with willing authorities for operating agreements

or public external lighting For public-private partnership contracts: Try to implement first projects, notably in public external lighting, and establish a partnership with Gimelec (group of ESCO’s) 11.2 Lessons learnt in Emilia-Romagna Region, Italy In the Italian context there are many opportunities for energy improvements in the public sector, such as:

• Measures on the envelope, including window and frame replacment, wall and roof insulation, …

• Replacement with more efficient plants (condensing boilers, CHP, district heating, etc.)

• Measures on Public Lighting (substituting lamps, reducing glare (sky) pollution, light intensity control, monitoring, etc)

• RES application (PV, solar thermal, biomass, geothermal heat pumps) On the other hand, the Local Authorities starting conditions are on average not very good, as:

• Running costs for energy are increasing, • Little financial availability for refurbishment investments and for RES use; • Short of staff able to design and manage energy measures on estate, beyond the

ordinary maintenance. Need of outsourcing the whole energy management. As confirmed by the trainees participating to the Pu-Benefs training seminar, the main constraints in the public sector for improving energy efficiency services/contracts are:

• lack of internal financial resources; • scepticism about complex contractual schemes; • lack of skills/training amongst public officers; • poor environmental issues awareness/motivation among politicians; • lack of information on ESCOs and new financial schemes .

The knowledge about energy services by Public Authorities is still quite scarce even if increasing. This troubled situation can be solved through new contract features, including these steps:


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• The Public Authority proposes the interventions. • The tenderer decides which investment to propose and gets additional evaluation

marks accordingly. • Financing of the intervention by the ESCO, with the foreseen yearly saving due to the

proposed interventions deduced from the yearly fixed amount (=guaranteed saving). • The yearly amount is combined with a “sharing savings” incentive (mainly for

rewarding improved consumer behaviour). Other recommendations concern:

• Reducing the Supply Contract’s faults - Replace a unique tariff (directly proportional to the measured heat), with a

multiple one, composed of: o 3 fixed quotas, covering ordinary and extraordinary maintenance costs

and investment rate. o A variable quota related to the energy consumption

This way the interest of the service company to let the consumption increase is reduced, as on this increase there are not relevant profit margins.

• Remove, whenever possible, the final consumption controls from the service

company and commit it to the users. • Use of thermostatic valves on radiators; • Launching of communication and education initiatives (schools and training for

public/private technicians ); • Make the service provider aware and interested on saving.

11.3 Lessons learnt in Baden-Württemberg, Germany Barriers, shortfalls Legal framework The public procurement procedure is still very complex and certainly prevents some of the administrations to initialize a EPC or ESC project. KEA is offering support for the administrations. At least the competition generated in a tendering procedure is helpful for the administrations to optimize the results. The tendering procedure may be very cost intensive for the ESCO. The total man power for an ESCO to provide a qualified bid in a tendering proceeding is at least 5 to 10 working days. To avoid exceeding tendering cost for the ESCO, the number of ESCOs participating in the tendering proceeding should be fixed on 3- 4.


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Information deficit and internal competence of public bodies: The successful implementation of energy service projects is often hindered by a couple of items coming up with the project development:

• Most of public authorities have no detailed information about the energy costs in their building stock

• Even less do run a professional building management, and have only few information about the technical, organisational and low-investive weak points in their buildings.

Experience shows that the prerequisites to run a successful project implements good knowledge about weak points and costs. In earlier projects, the public authority allocated the raw analysis/feasibility study completely to the ESCOs. This has lead to a weak position of the authorities during the purchasing and negotiation process. As long only the ESCO has the know- how on the needs for action, the ESCO controls the process. The result has often been problematic: eg. In many projects severe interface problems occurred. Measures did often only optimize or replace the energy saving parts of the installations, which urged the public authorities to replace the non- energy saving part of the installations. In many discussions with public authorities we had the impression that the experiences which some administrations made with such a bad prepared contracting project has left behind the opinion, that ESCO try only to pick the best out of the bunch of attractive measures, leaving the authorities with the unattractive measures. Resuming our experiences this is not the case. Projects being raised in the last two or three years have learned from that and recommend public authorities to prepare energy saving projects with their own feasibility study, analyzing the most typical weak points in public buildings´ installations Sufficient ESCO, technical consultants About 10 ESCO are operating in our region. The exceeding number of tenders requires at least 2 new ESCO companies. KEA foresees training seminars for one small size company already providing ESC and now starting up the EPC projects. Financial restrictions: The financial restrictions are one of the main reasons to prevent public bodies to realize energy saving measures on their own and start up contracting projects. The implementation of new financing models (flat rate system) enables ESCO to offer very attractive financing terms. Missing normalisation and standardisation: The standardisation framework for contracting business is already existing in our region: concerning the proceeding (standard are EU Regulations for public tenders), the tendering papers are more or less based on a model contract. The FS is also more or less standardized. Political support: Regional government as well as federal government is in general supporting and promoting PPP activities, i.e. the DENA contracting campaign etc. But still some small obstacles exist: the regional ministry of environment provides a beneficiary programme targeting energy saving measures and rewarding CO2 savings. The programme supports energy saving measures done by public bodies with subsidiaries, but does exclude measures realized within a contracting project from that subsidiary programme, although the ESCO will normally deliver a better performance. Measures needed to improve


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Still public bodies need further training seminars to discuss their items and overcome some of the hurdles still existing. We are in good hope, that the good experiences made in the IKEC project and in other projects will facilitate the disseminated in the next months. 11.4 Lessons learnt in United Kingdom Considerations of issues arising from the project The analysis of ESCOs and of energy performance contracting shows that there is a wide variety of models being used for the delivery of energy projects by public authorities. This is partly because different authorities have different attitudes to (a) risk and (b) the degree to which they wish to involve the private sector in their projects. However the principal reason for so many different approaches is that in the United Kingdom there is not yet a well developed market for the provision of energy services to public and other authorities. The model of energy performance contracting, which is well developed in other jurisdictions, has not yet achieved a standardised form in the United Kingdom. It is likely, as more projects are considered, that this will change in the future. There are good reasons for this in that of all of the various technologies that are available, CHP comes the closest to being financially and economically viable. There is, however, still an issue with the use of CHP. This is that, while the private sector is certainly interested in the opportunity to build and operate plant to deliver heat and power through networks, it is not as interested in the requirement in many cases that the suitable heat network be constructed. Of course the private sector will do this, but it adds very considerably to the costs of projects as instead of simply contracting with the private sector to deliver a service, it is necessary to contract with them to build and finance infrastructure. That part of the project clearly has to be paid for and it is this that has given rise to difficulties in a number of CHP projects in that there is frequently a funding gap around the cost of construction of the network. These issues can be addressed and indeed have been in the case studies which we have considered. There is an argument that the cost of funding the necessary infrastructure should not necessarily lie with the private sector. If heat networks are to be set up and if this is thought to be a public good, then perhaps public funding should be directed towards assistance with these capital costs. The issues here are not dissimilar to those which applied to the construction of the electricity transmission and distribution network in the 1960s and 1970s, which was financed by the public purse. It is clear that the Government’s Community Energy Programme is not to be continued, as has recently been announced by DEFRA. A number of projects which were to be financed through that mechanism have not come to market and the view of DEFRA therefore is that available funding should be allocated to other better carbon saving programmes. It is not yet clear what those will be or whether, at some stage in the future, the Government might introduce some form of commitment to renewable heat.


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For the moment, therefore, the result is that ESCO schemes do take different forms which depend to a large extent on how the scheme is to be financed. The financing is likely to be a combination of available grant assistance, financial commitment by the local authority, and financial commitment by a private sector organisation engaged in the delivery of the project. In turn, the private sector may seek to borrow funds to finance its commitment and those borrowings may be secured on the project documents, e.g. on the principal contract with the public authority to make payment for the services provided in terms of the scheme, often referred to as the anchor contract. Timescales must also be considered as an issue for projects. Taking any project forward will require the preparation and approval of a business case. One important decision in any project, once it has been approved, will be the form of any ESCO to be set up. Once that decision has been made, the timescale for setting up an ESCO with an appropriate memorandum and articles of association could in fact be quite short. Much more time is likely to have been spent before in structuring the project and in considering who should participate in the ESCO and what form it should take. One advantage of setting up an ESCO, however, is that the use of a separate vehicle for taking the project forward gives the project added impetus as those who are involved tend to feel more committed and energised if there is a special purpose vehicle in place.

The time taken to develop an ESCO procurement contract is also and issue particularly with the EU tendering requirements. Many projects will be designed to fit around redevelopment or new development and sufficient time should be allowed for the procurement process so that it does not lag behind the agreed timetable for any development construction work. 11.5 Lessons learnt in Sweden Over the course of this project 2005-2007, and partially due to this project, the market for energy services and performance contracting has developed positively within the public sector. Several of the barriers, shortfalls and hindrances initially identified as important to overcome, are today more or less solved at least in theory. The main challenge today is to focus on take up activities, moving public bodies from the situation of knowing energy services being feasible, to a situation where they actually them selves start being active and send out RFQ’s etc. Because one lesson learnt is that it’s very easy for EU-projects and different Swedish initiatives to unintentionally dominate the project development, leaving the customers somewhat left behind. Main lessons learnt: The sometimes negative perception within the public sector regarding EPC and Energy Efficiency Services and their compliance with the Public Procurement Act, is a far larger obstacle to overcome than the actual legislation itself. With good information and our step by step guideline, the Public Procurement Act can be fully respected in terms of tendering and procurement procedures. EPC and Energy Efficiency project themselves seldom get sufficient attention from politicians and real decision makers as long as they are promoted as energy or efficiency project, even though they are proved to be profitable. They way to get the appropriate attention is to promote the projects as “tools” for addressing the decision makers and their organisations challenges, such as environmental improvement, demands for cost cuts or increased profitability as well as compliance with new national regulation and European policies and directives.


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The tendering, procurement and contractual processes must be better anchored within a larger part of the customer’s organisation in order to avoid misunderstandings, expectation gaps and internal opposition. The traditional top-down approach where management and procurement staff close contracts and just roll them out into their organisation doesn’t work for EPC projects. Without the involvement, acceptance and anchoring among the O&M staff and other service personnel the projects are doomed to either being halted or stopped during the development phase, or if being implemented, under perform due to the lack of constructive cooperation. Short comments on key issues and measures to improve 1. Legal framework There are today no legal or practical hindrances for ESCO projects out of a public procurement perspective. However public procurement is still being “interpreted” differently and some minor backslashes has occurred mainly due to customers being “too” creative when modifying templates and sometimes use inexperienced consultants. To improve this situation the State Public Inquiry for the ESD implementation are proposed to develop one “Definite Public Procurement Guideline” focusing on Energy Services within their work to pave the way for the implementation of the energy service directive. 2. Information deficit and internal competence of public bodies There is today no general shortage of information, but a shortage of experience of how to interpret and use information available among many public bodies. This fact, either resulting in potential projects not reaching the market, or that private consultants and project developers actually taking over the public bodies “strategic planning” in terms procurement and implementation processes. To improve this situation must the currently relatively small group of persons, companies and organisations be increased, and one way of doing it is to appoint and training key persons within strategic branch organisations and larger public real estate companies and regional bodies such as Energy Agencies and County Councils. By this approach is the “collegial dissemination and capacity building” expected to increase in a positive way. 3. Sufficient ESCO’s and technical consultants There is today a major deficit on experienced ESCO consultants, and even though the market projections are positive, many traditional energy and technology consultants are still hesitant to move into this market. Also on the ESCO side there is a shortage of actors leading to a less diverse market. In terms of the ESCO’s several companies are interested, but at the same time there is a severe shortage of experienced energy analysts with the dual technological and economical perspective needed. The upcoming Swedish implementation of the ESD, Energy Service Directive is expected to improve the situation by rising the awareness and legitimise the so far a bit “novel” energy service market and thereby attract more consultants and ESCO’s.


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4. Financial restrictions In terms of financial restrictions there are a few obstacles and uncertainties hindering an even more active ESCO development in Sweden. The first is the VAT problem linked to the EPC projects, since the ESCO services are “VAT-classed” while many public bodies do not pay VAT and therefore get stuck with an additional cost of 25%. Another problem hindering a more active use of third party financing is the accounting insecurities regarding if the ESCO/TPF investment should be on or of the balance sheet of the customer. These issues seem to be difficult to handle even though parts of the VAT problems might be solved with a proposed new regulation for “reversed VAT”. In terms of clarifying the accounting issues linked to ESCO/TPF financing, the situation could be significantly improved if the State Public Inquiry for the ESD implementation included this task in their work. 5. Missing normalisation and standardisation There are no problems with normalisation in terms of climate conditions. However normalisation and adjustments for changed usage and indoor climate requirements has historically caused disputes between ESCO’s and customers. However the situation is successively improving as more and more contracts include a type of “Running condition template” for each building clarifying contracted usage time and indoor climate requirements. By applying this structure can the savings calculations be normalised even if changes has occurred. 6. Political support Political support is important for the ESCO development, but so far has the political support been limited to the local level, and even though national politicians and their parities are being informed, they haven’t yet given the ESCO market much attention. To improve this situation and make the politicians more interested the ESCO services needs to be presented and marketed differently. Instead of focusing on energy efficiency as the goal, the concept should be presented as a very cost efficient, some times even free, tool for meeting the politicians goals and objectives in terms of environment and limited public spending etc. 7. Facilitators for local authorities The lack of facilitators for local authorities was more of an issue when starting the the project in 2005 than now. The network of Forum for Energy Services and some of the Regional Energy Agencies can now assist and facilitate the planning for local authorities. But the situation can of course be further improved through the training of key personnel with in the county councils, please also see under point 2 above. 11.6 Lessons learnt in Finland Barriers, shortfalls 1. Legal framework The public procurement procedure in Finland demands to tender any larger procurements and this creates problems; in tendering there is a problem that all suppliers may not be willing to make their own review of the target, if the probability of getting the contract is low, and suppliers don’t always trust on reviews made by some other party. On the other hand there are no clear instructions how to tender ESCO contracts, and not much experience in this. Especially if the investment is small, tendering cost can be too large.


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Additionally, public accounting problems have occurred: how to separate between investments and operational economy. Also legally demanded procedures for decision making process if municipality makes the investment by itself are quite heavy. 2. Information deficit Especially in smaller municipalities and bodies there is a need for more information and support; larger municipalities and governmental facility management have joined energy saving contract and have better awareness. 3. Internal competence of public bodies This can be an issue, contractors proposed that at least bigger municipalities should have specialised energy director, now they have to work with persons who are not familiar with energy issues and thus it is difficult to develop any new operation models. Also disbelief in savings because of lack of technical knowledge can be an issue. 4. Sufficient ESCO, technical consultants There are a quite limited number of active energy service providers. On the national energy agency Motiva’s list there are only seven suppliers that have made EPC contracts. However, the lack of technical skills of services providers is not an issue, rather than the lack of activity. Also every ESCO has its own way of doing and marketing their products, which may confuse customers. 5. Financial restrictions Municipalities and governmental organisations have access to relatively cheap funding to finance actions with reasonable payback time. The financing component of energy services is thus not so widely used, although it would accelerate the decision making process. 6. Missing normalisation and standardisation : no such issues 7. Political support Political support and thus the customer activity of the municipalities is getting better, but more information dissemination, marketing, and support must be done to activate the customer base and convince the decision makers 8. Missing facilitators for local authorities Many buildings are in so good shape that large enough savings can’t be found. On the other hand, saving investments can be so small in relation to whole renovation investments that ESCO investments are not seen attractive. Measures needed to improve: In many municipalities ESCO contracts are seen quite single sided as investments funded by an external party. However, in reality there is diverse selection of services already. ESCO services should be marketed as a broad selection from which customers could choose the services that suit them best. One cure for the problem of too small investment opportunities is bundling smaller ESCO investments into a one large investment. This way, service provider’s risk is reduced but monitoring realized savings is harder. New customers: small municipalities and public bodies (such as congregations) New areas: renewable energy ESCO contracting The problems of tendering could be mitigated by using negotiating procedure and an independent consultant to do the initial review on the target.


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Public accounting problems can be mitigated by designing suitable contract models. Contract models that adapt to different needs for municipal and other public customers, as well as for renewable energy ESCO contracts, should be developed. More information and marketing is needed for the employees and decision makers. Energy savings are in most cases not seen as an important independent aspect, but rather as an investment which can be implemented together with a larger renovation. ESCO contractors have proposed that at least bigger municipalities should have specialised energy director, so that the level of knowledge would be sufficient to make ESCO contracts. The Association of Finnish Local and Regional Authorities could be used as a marketing channel. New marketing material is needed, such as an “ESCO-handbook” introducing tendering, financing and contract models, and concrete success stories as a marketing material. 11.7 Lessons learnt in Catalonia, Spain 1. Legal framework (public procurement procedure etc.) Although there is no specific legal framework for energy services, provision is made under present state and autonomous legislation, enabling local authorities to employ the tools for contracting that they are already used to working with. 2. Information deficit The lack of data on the starting situation in buildings is considered one of the most important barriers to the large-scale adoption of the mechanism. Moreover, uncertainty about how energy prices will evolve and the loss of the reference provided by fixed energy tariffs with the introduction of the free market make it difficult to find a reference point to take into account rising costs. 3. Internal competence of public bodies Local authorities have full powers to contract energy services for their buildings. 4. Sufficient ESCO, technical consultants Companies providing partial energy services are beginning to emerge, but the market needs to mature, and they need to accept the risks that a mechanism of this nature implies. Nonetheless, ESCO-type companies are starting to appear. 5. Financial restrictions In the case of Catalonia, more than financial restrictions, we should speak of long payback periods that imply longer than normal contractual periods, as well as variations in (basically energy) costs over the period. 6. Missing normalisation and standardisation In order to encourage the adoption of this mechanism, we need model clauses, model contracts and model specifications. However, the fact that several local authorities have already become pioneers, beginning to adopt the mechanism, also provides an important source of awareness, promotion and training.


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7. Political support The Catalan Government has made the introduction of energy services a priority line of action in its Energy Plan. The mechanism therefore enjoys political support from the Autonomous Government. Nonetheless, it is important to continue disseminating the initiative and providing technical support for local authorities during the contracting process. 8. Missing facilitators for local authorities Energy managers are needed at local authorities in order to facilitate the introduction of this mechanism. Through ICAEN, the Catalan Government provides technical assistance and support in the contracting process. Measures needed to improve:

• Availability of data describing initial situations in municipal buildings • Model specifications and contractual clauses • Case studies of application • Maturity and diversification amongst companies

11.8 Lessons learnt in Upper Austria Since 1998 the ECP/TPF market in Upper Austria is supported by a public support programme which is managed by ESV together with the regional administration. Initially the focus of the programme was put on EPC/TPF projects for public buildings, later also commercially used buildings followed. In principle most of the 444 Upper Austrian municipalities know about EPC. Although the ECP/TPF market in Upper Austria is already well developed (especially in the public sector), there is still a need for information: interviews carried out in the framework of the project showed that public authorities were really interested in the EPC/TPF scheme and 64% said that they found the financing scheme attractive. However only 20% had already implemented a EPC/TPF project. Inquiries have shown that best practice examples and study tours are a very helpful instrument to trigger new projects. As the general awareness and information level concerning EPC/TPF in public administration is already very high, it is necessary to address new target groups to keep the market development progressing. This was for example done within the project by targeting at social organisations. However, especially targeted information and awareness raising instruments are necessary and requested by the municipalities; it has to be acknowledged that there is limited scope for EPC/TPF projects in the public sector. Very often public authorities are interested in the ECP concept but by dealing with it, they find out that they would better implement the respective retrofitting measures themselves (without the services of an ESCO). Very often there are public administration officers in the municipality, who are very active and have already gained experience in energy matters. These people are very often the drivers to implement the proposed measures without the help of an ESCO.


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In addition to the activities carried out for the public sector, a focus was put on the transferability of the experiences gained so far to SMEs in order to increase the number of EPC/TPF projects there. The main differences between the public and the business sector can be summarised as follows: Large group of potential clients: The main reason for the very slow up-take of the EPC/TPF scheme in the business sector is that the target group (potential clients, business sector) is very large and divers. Contrary to the public sector – where there are a limited number of municipalities in Upper Austria and it is possible to select those which EPC/TPF might be interesting – the number of companies is much higher and there are no simple selection criteria available, which makes it very difficult to identify those companies who could be interested in EPC/TPF. "Chicken-egg problem": Another major problem with SME's is the so-called "chicken-egg" problem, which means that potential clients in the business sector do not know the EPC/TPF scheme and are therefore not interested in requesting this service and vice-versa ESCOs are not motivated to provide their services for which there is no active market demand. Adaptation of the EPC/TPF contract: One difference between SME's and public bodies is that SME's can go bankrupt or be closed down for any reason, which is normally not the case with ECP/TPF clients in the public sector (municipalities for example). This fact makes it necessary to take reasonable precautions for bankruptcy in the contract. Additionally, it might be more difficult for the ESCO to pre-finance the investment and carry out the respective negotiations with bank institutes. Project duration: The average contract duration of an EPC/TPF contract in Upper Austria is between 8 and 10 years. However, in the public building sector the contract duration can be up to 15 years. In the business sector such a long contract duration is seen differently and many companies do not want to enter a contract which runs for more than 5 years. Decision making process: In general the decision making process may be faster than in the public sector, which is beneficial for carrying out EPC/TPF projects. Project implementation: Another advantage of SMEs is that the project implementation is in many cases easier because of fewer restrictions given by the client. For example, public bodies often fear that the project would not support local economy and they therefore request to include local craftsmen in the project implementation. This is often not the case for SMEs. The experiences gained in the implementation of EPC/TPF projects in public buildings are very helpful to start building up a TPF market in companies. However, several structural differences have to be taken into account and adaptions of the EPC/TPF contract might be necessary. In addition, the particularities of the business sector have to be taken into account when promoting the EPC/TPF scheme. In general it can be summarised the market development for EPC/TPF projects takes time and requires continuous activities.


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11.9 Summary of lessons learnt

Barriers, shortfalls Legal framework (public procurement procedure etc.)

• In one of the partner country (France) poses a serious problem • In other countries needs to adapted the legal framework or in some countries not

hindering at all (see Austria, Germany, UK) Information deficit

• Very high in all partner countries, perhaps with an exception in Upper Austria • Concerns as well the management dimension of energy, the technologies available

and the contractual systems available Internal competence of public bodies

• Sometimes no energy management does exist, so no data available, no baseline • Very often is know how missing or no time available, can create disbelief in saving

potential • Fear of losing competence, loss of jobs

Sufficient ESCO, technical consultants

• Depends very much on the market: well developed ESCO market in Austria, Germany and Finland, intermediate situation in Sweden and UK, but small number of ESCO and/or not adapted offers in France, Italy and Spain

• In some countries a lack of technical consultant capable of linking technical energy saving potential and EPC has been identified;

Financial restrictions

• Not all investments can be financed by EPC, especially investment with infrastructural dimension (like construction of a district heating network)

• In most of the countries EPC services are classed with VAT, adding additional costs for the local authority (up to 25%), which have to pay the VAT; thus creating a disadvantage for the EPC solution

• EU tendering requirements might increase the transaction costs Missing normalisation and standardisation

• Scepticism about complex contractual structure • Lack of accepted and tested contract models, due also to the large variety of

technical measures possible


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Political support • Poor environmental issues awareness/motivation among politicians; • Reserved view of engaging with private partners (certain degree of mistrust) • If the private company can do it, why not we on our own as local authority?” • Challenge to take politicians from knowing, how EPC works to do EPC in his own

local authority area • EPC is considered very much as only an energy subject and one between others also

very important (how are the priorities set?) Missing facilitators for local authorities

• Has been identified in several partner regions as an obstacle Measures needed to improve the situation for EPC Setting a favourable environment, information and awareness raising activities

• Encouraging competent energy efficiency management in public bodies • Get attention of decision makers by showing how EPC addresses and solves

eventually their general objectives and challenges (like budget restrictions) • New marketing material is needed such as an “EPC handbook” • Set up catalogues of good practices examples of EPC with local authorities • Facilitate visits and direct exchange with technicians in local authorities managing

successful EPC projects. Training demand

• Training as well the technicians as the decisions makers is in most cases necessary; a good way is to cooperate with the federations or associations of the local authorities or the technicians

Simplification and anchoring of procedure

• The tendering, procurement and contractual processes must be better anchored within a larger part of the customer’s organisation in order to avoid misunderstandings, expectation gaps and internal opposition.

• Giving more attention to the description and recording of the usage of the buildings treated by EPC (e.g. running condition template), thus facilitating the adaptation of the saving objectives in case of modification of the use of the buildings

• Simplification and well structured project development (as shown by Swedish and German partner) should be promoted

Facilitator and sound project development

• The set up of independent advisers, called facilitators, is a very good mean to assist the municipalities in starting real EPC projects (see Upper Austria and Baden-Württemberg)

• Encouraging the cooperation of several municipalities in order to achieve a correct project size (see “building pools” in Germany or UK)

• Special attention needs to be paid to the monitoring of the EPC contract; the local authority has to foresee this right from the beginning; EPC does not mean to outsource the complete energy management


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Government support • Develop a “Definite Public Procurement Guide” for giving guidance and security to the

local authorities • Tackling the VAT issue for EPC by for example reversing the VAT payed for the

specific EPC services to the local authorities (in total or partially) • More and clear support by the different government levels encouraging the use of

EPC • Indicating clearly the interest and usefulness of EPC in the different energy efficiency

strategies and plans • Financial support mechanisms for the starting and market development phase would

be of great help: securing the choice of local authorities for EPC, increasing the demand, reducing the transaction costs

European Commission support The readjustment of the EU Directive should promote a more favourable context for the development of EPC by:

• giving a legitimacy to EPC which will facilitate awareness raising initiatives • support the set up and running of EPC facilitators and clearing house organisations

giving independent and qualified advice • encouraging the simplification of administrative procedures in the Member States

relating to the implementation of EPC • offering a market outlook which will encourage ESCO’s to make proposals to local

authorities


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12. Annexes


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12.1 Annexes to contract guideline (chapter 6.1)

APPENDIX 1 General Data and status of Buildings

1. General Data on the building.

• Name • Street & No. • Town/City • Post Code

2. Year of Construction. Any “rebuilding” dates 3. Year of HVAC systems 4. Current use(s) of building

• School No of students • Office No of staff • Residence. No of tenants

5. Floor areas to be heated. 6. Installed heating capacity 7. Radiators/ Thermostat details 8. Utilisation times. 9. Visual appearance (Take photos) 10. Defects. 11. List of energy using machines. 12. State of maintenance records. 13. Energy Supply

• Details of meters, Gas, Electricity, Water, Heat. 14. Heating plant details 15. Hot water supply details. How much is used. 16. Ventilation plant details

• Waste heat usage? • Smoke extractor plant? • Condition (Asbestos)?

17. Lighting details, levels and load. 18. Consumers.

• Cookers • Utilisation of?

19. Comfort levels. Client to suggest.


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ABBREVIATIONS KW Kilowatt KWh Kilowatt hour MWh Megawatt hour TRV Thermostatic Radiator Valves ESCO Energy Services Company VAT Value Added Tax

DEFINITIONS Contract period: means the period from and including the Effective Date until the earlier of the Termination Date and the Expiry Date. Default Rate: means [ ] % above the base rate from time to time of [ ] Bank. Energy: energy in the form of electricity, natural gas (including liquefied natural gas and liquefied petroleum gas), district heating and cooling, heating fuel, coal and lignite, transport fuels (excluding aviation and foreign bunker fuels), and forestry and agricultural energy products and waste. Energy Audits: a systematic procedure that obtains adequate knowledge of the existing energy profile of the building site, industrial operation, etc.; identifies and quantifies cost effective energy savings opportunities; and reports the findings. Energy Costs baseline: Annual energy consumptions and energy costs determined for the time prior to contracting which form the basis for calculating the energy consumption and energy cost savings achieved in connection with the saving contract of (reference) year Energy Distributor: the natural or legal person responsible for transporting energy, either through grids and pipelines (“grid-bound”), such as electricity (medium and low voltage), natural gas and district heating and cooling, or through other transportation and distribution and distribution networks designed to deliver such energy as heating fuel, coal, lignite and transportation fuels to final customers. Energy Efficiency: a reduction in primary energy consumption, taking place in the energy transformation, transmission, distribution or end-use stage, due to technological, behavioural and/or economic changes, providing the same or a higher standard of comfort or amenities. End-use energy efficiency improvements reduce final as well as primary energy consumption. Energy Efficiency Measures: all actions, such as energy services, energy efficiency programmes and mechanisms or similar activities, initiated by any market player, including governments and authorities, that lead to verifiable and measurable improvements in end use energy efficiency, and thus to energy end-use savings, during the period of measurement. Energy Efficiency Mechanisms: horizontal and general measures, such a regulated tariffs, energy taxes, subsidy schemes, funds, certification schemes etc., undertaken by governments or government bodies to create a broad supportive framework or incentives for energy companies, energy service companies, installers or other market players to provide energy services and energy efficiency measures, not addressing end users directly. Energy Efficiency Programmes: activities such as energy audits, financial rebates for energy-efficient equipment, information, campaigns etc., normally paid for collectively and


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offered by national agencies, energy retail suppliers, distributors, energy service companies and other market players. Energy Performance Contracting: a contractual arrangement between the beneficiary and the provider of an energy efficiency measure, where installation, maintenance and replacement of energy efficiency investments are paid for in relation to a contractually agreed level of performance including energy savings. Energy Savings: an amount of energy determined by measuring and/or estimating consumption (final or primary) before and comparing it to the use after the implementation of a measure, while ensuring adjustment and normalisation for extrinsic conditions commonly affecting energy use. Energy Service: the physical amenity for energy end users derived from a combination of energy and energy using technology and/or the operation, maintenance and control necessary to deliver the service (examples are indoor thermal comfort, lighting comfort, domestic hot water, refrigeration, product manufacturing, etc). Energy services meet quality performance requirements and improve energy efficiency, are contracted for a fixed period of time and paid for directly by the customer or agent who benefits from them. Energy Service Company (ESCO): a company that delivers energy efficiency measures in a user’s facility, and accepts some degree of technical and sometimes financial risk in doing so. The payment for the services delivered is based (either wholly or in part) on meeting quality performance standards and/or the achievement of energy efficiency improvements. Effective Date: means the date of this agreement and is the date on which the ESCO starts supplying the service to the Client. Expiry date: means (This will be a fixed date) Final Customer: end-use customer in the household, agricultural, commercial, public, industrial sector and in the transport sector. New Plant and Equipment: means the plant and equipment to be provided by the ESCO and which is identified in Schedule X Reference Year: the 12 month period (usually a calendar year) established for the energy consumption and costs baseline. The reference year should (if possible) be the year prior to the start of the contracting project. Alignment with the energy supplies during the last three years prior to the start of the performance contracting ensures the best possible representation of the energy consumption. Termination Date: means any date of early termination of this agreement. Utilisation: Change in utilisation in particular means changes in the floor space used, the period of utilisation or the kind of use of the buildings within the contract period. This is the Client’s responsibility. Also, if the utilisation of the building changes materially within the contract period, the guaranteed savings may be adjusted or the contract may be terminated.


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Appendix 2

QUALIFICATION OF COMPANIES Prequalification of tenderers. Listed here are some criteria. Others might be included if needed, e.g. companies employing ethnic minority staff. Companies must show the in-force certification on the Company Quality System, according to EN ISO 9001: 2000,, for the implementation of the O&M service related to boiler houses and heating plants. The company must also declare to be in possession of the following :

• Continuous management for at least one similar service (minimum duration period: three years) over the last 5 years for an overall amount of xxx.000,00 Euro

• To have an average volume of business in relation to the last three years, at least by xxx.000 Euro

• The availability of one or more banks certifying the Company’s economical suitability for the tender assignment

• List of the main services provided, in relation to the years 200x/200y/200z, reporting the amounts, the dates and the final users, both public and private, of the services.

• To be based within the County/Province of XXX or in other close Counties/Provinces, but not far than 50 Km from the Local Authority or committing to open a new base therein before the service starts.


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Appendix 3

Proposals Evaluation This proposals methodology is that used in Italy. It is an excellent system, if somewhat

complicated, and should be thoroughly understood before being included in the contract. The Local Authority will proceed to identify the awarded Company on the basis of the best value for money. In order to do this, the appointed engineer will assess the proposals on the basis of the following criteria: A) Economic evaluation 40 points

B) Technical evaluation 45 points

C) Evaluation on quality of maintenance 15 points

Total 100 points Points are set up on the basis of the following criteria:

A) The 40 points on economical evaluation will be assigned as follow:.

1. Amount related to the heating systems C C = C1 + C2F + C2V where: C1 = fixed yearly amount related to the depreciation of the proposed investments, multiplied by the contract’s duration years. The total amount proposed on investments and the interest rate shall be explicitly mentioned. C2F = fixed quota representing the yearly operation, boiler legal responsibility, ordinary and extraordinary maintenance, multiplied by the contract’s duration years. This quota shall not exceed 20% of the average energy consumption level (in euro) mentioned in Annex B. C2V = variable quota representing the product of the tariff T expressed in euro/kWh and the energy yearly provided to the plant Et, computed or measured (if heat meters are available) downstream of heating generators. The estimated value Et, related to standard conditions of degree/days and working hours, for each plant, is reported in the Annex B. On this value it will be possible to apply a reduction if energy saving measures are foreseen by the tenderer on the final uses (energy saving value and measures shall be mentioned in the proposal). Also the variable yearly quota (T x Et) must be multiplied by the contract’s duration years.


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2. Amount related to electrical devices (summer air-conditioning, lighting and other uses) G = G1 + G2F + G2V where G1 = fixed yearly amount related to the depreciation of the proposed investments, multiplied by the contract’s duration years. The total amount proposed on investments and the interest rate shall be explicitly mentioned. G2F = fixed quota representing the yearly operation, ordinary and extraordinary maintenance, multiplied by the contract’s duration years. This quota shall not exceed 10% of the average energy consumption level (in euro) mentioned in Annex B. G2V = variable quota representing the product of the tariff E expressed in euro/kWh and the estimated value of overall electric energy yearly provided Ee reported in the Annex B. On this value it will be possible to apply a reduction if energy saving measures are foreseen by the tenderer on the final uses (energy saving value and measures shall be mentioned in the proposal). Also the variable yearly quota (E x Ee) must be multiplied by the contract’s duration years.

The overall amount for the Global Energy Service is the result of the former amounts: CT = C + G The average CT of all the overall amounts CTi of proposals admitted to the economical evaluations, is computed (expressed in millions Euro). The overall amount will have to be considered net of the safety costs, not to be negotiated. A normal distribution graph is defined, centred on the value CT, having on the x axis the economical value related to the amount CT and in the y axis the value F(CT) resulting by the following

F(CT) = 2

2

2

)(

2

1 σ

πσ

CTCTi

e−−

where: CT means the average of the overall amounts offered CTi means the overall amount offered by the competitor σ means the standard deviation, equal to (0,1 x base tender value in art.1, net of the safety costs, expressed in million euro). If the overall amount offered by the competitor is located on the left side of the above mentioned normal graph, a coefficient COAi for the economical offer related to the i participant is computed as F(CTi)/F(CT). If the overall amount offered by the competitor is located on the right side of the above mentioned normal graph, a coefficient COAi for the economical offer related to the i participant is computed as F(CTi)/F(CT)]2


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The score for each offering Company is set up as follows: PTi = 40 * COAi B) The 45 scores related to the technical evaluation are assigned in this way. For the works implementation as described in the Annex C, 35 scores max will be assigned. Scores will be assigned as Table 2 reports (single score for each measure to be implemented). Further scores (10 scores max) will be assigned for possible other proposed measures, in connection with the measures mentioned in Table 3. The following documents must be annexed: technical report, workable schemes, metrical calculation, assessment on the primary energy yearly saved. Table : Scores on measures for technological refurbishment

Heating plants Heating/electrical Power

Score

n° Name kW 35

TOTAL 35,00


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Table : Scores for measures proposed by the Company

TECHNOLOGIES

UNIT OF MEASUREMENT

SCORE

MAX NUMBER OF

INSTALLABLE UNITS

MAX ACHIEVABLE

SCORE

Solar Thermal m2 PV kWp Lighting control (presence detectors, daylighting sensors)

kW

Energy efficient lamps and luminaires

kW

Air conditioning (gas absorption units)

kW

Recovering-recycling system on the air expulsion ducts

kW

Geothermal heat pumps kW

Biomass boiler kW

Sun external shielding on the facades South, East, West

m2

TOTAL 10 Within the proposal, the expected overall energy saving % must be indicated (in terms of primary energy, assessing also separately the percentage thermal and electric energy savings).

B) The 15 scores related to the maintenance quality evaluation will be assigned on the basis of the periodicities presented in the maintenance plan.

The Annex E reports a proposal for the periodicity of maintenance measures. Companies accepting this proposal will be awarded with 15 scores max. Companies proposing different periodicity for each measure (scheme of Annex E), will get 1 score minus for every change on the right side (lower frequency) and 1 score more for every change on the left side (higher frequency), regarding the periodicity from 1S to A. The maximum score 15 will not be exceeded. The Local Authority has the possibility to proceed by law (art. 25 Act 157/95) concerning the checking out of “abnormally low” proposals.


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12.2 English summaries of feasibility studies (chapter 5.3)


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