At this point in time whether Europe will achieve all its 2020 climate targets is an open question. In the EC’s latest assessments, as of approximately mid-2014 the majority of member states were found to be “advancing well” towards the 20% renewables target. Energy savings for the region were projected to be in the range 18% to 19% by 2020, missing that target by 1% to 2%.
Industry and commercial buildings offer significant potential for interventions for more sustainable energy use. However, this is largely untapped, especially by SMEs, as the costs of such projects are generally not more, and usually a lot less, than about €1 million, says Jessica Stromback, Chair and SVP Europe at Joule Assets.
“The reason is quite simply a ‘financing gap’ as these projects are too small for traditional investment houses,” she says, explaining the background to the Sustainable Energy Asset Evaluation and Optimization Framework (SEAF) initiative. [Europe’s Energy Efficiency Challenge]
“We estimate that as much as 85% of the market is out of reach and largely underserved by financial institutions.”
The 2-year project is being undertaken with support from the EC’s Horizon 2020 research and innovation programme. Key partners include the Aristotle University of Thessaloniki, HS Engineering Insurance Ltd, the University of Manchester, the Italian ESCO Servizi Energia Ambiente and the advisory company Verco.
Sustainable energy assets
The aim of the SEAF project is to bridge this investment gap and grow the market through the provision of a standardized platform that brings together all the relevant parties to a project, i.e. the ESCO, insurer and investor/financier, explains Stromback.
“It combines Joule Assets’ market valuation tool developed in the US with HSB’s insurance risk assessment and the ICP standardization protocols to build an automated project evaluation, insurance pre-qualification and logging tool,” she says.
In this context ‘sustainable energy assets’ include energy efficiency, demand response, and to a lesser extent onsite generation such as solar PV and storage.
A key feature is single entry of all data to then prepopulate the fields elsewhere in the tool, cutting down on the administrative and paperwork requirements and accelerating the evaluation process, which should be reduced to a few weeks compared with almost a year currently. In addition, the project funding ‘success rate’ – currently less than 5% – should be greatly increased.
Currently the tool is in beta testing phase with the modules being integrated and the first project data is being entered. The first project investments enabled through the tool are expected before the end of the year. The aim is to build up a pipeline of projects, which can then be offered to the investment community. Over the project lifetime the target is €15 million of investment, which should save up to 18GWh of electricity per year.
Sustainable energy resources
The tool is being developed for 10 countries – Austria, Belgium, Finland, France, Germany, Ireland, Italy, Portugal, Spain, UK – each with different potentials and market rules and requirements that must be written in.
In the longer term the goal is to expand its availability to other countries in Europe and potentially beyond.
“Because it’s modular we can expand the database according to what we see is needed,” Stromback says. She adds that Joule Assets is the owner of tool and while it is currently free to use, once out of beta testing it will become subscription based.
Basilio Simoes, CEO of the ESCOs Virtual Power Solutions and ISA Energy and a contributor to the development of the SEAF platform with project data, anticipates that it will significantly advance project developments by providing the facts and figures to cut through the usually complex negotiations that are necessary with the various parties.
He suggests it should be particularly beneficial with projects with a mix of technologies, some of the newer ones of which aren’t so well established in the market.
“Investors tend to understand projects with the standard technologies with which they are familiar but with a mix and with non-standard technologies the evaluation is more complex and SEAF will standardize the process,” he says. He adds that increasingly projects are tending towards multiple technologies. For example, storage combined with solar is opening the way for new opportunities such as automated demand response participation.
“We tend to work step by step and to start with basic monitoring and control and then over time to add new programmes on for example lighting or heating. The more revenue streams that can be enabled, the more the business case improves and the more the value of a project can be maximised.”
Sustainable energy opportunity
These demands vary by country and for example in Basilio’s home country, Portugal, he says there are strong demands currently for solar PV and energy efficient public lighting.
Overall, the energy efficiency opportunity in Europe is estimated at over €8 billion.
Says Basilio: “We don’t have enough financing and we don’t have enough insurers but we believe this will change as projects become more widespread and their benefits better known.”