The European Union has set itself an ambitious energy savings target of 20% by 2020 (when compared to the previously projected use of energy in 2020). Roughly speaking, this is equivalent to turning off 400 power stations.
As 2016 came to a close, the European Commission proposed an update to the Energy Efficiency Directive that included a new 30% energy efficiency target for 2030, and measures to update the Directive to make sure the new target is met.
Then, on 14 June 2018, the Commission, the Parliament and the Council agreed on a binding energy efficiency target for the EU for 2030 of 32.5% with a clause for an upwards revision by 2023.
As part of its efforts to accelerate energy efficiency, the EU is funding projects through Horizon 2020 with the aim to ensure collaboration across the value-chain from investors to energy service companies to end users, driving greater widespread adoption of energy efficiency initiatives.
This was the focus of the tech talk ‘Project Focus: Horizon 2020 work driving energy efficiency’, featuring three projects gathering momentum thanks to Horizon 2020.
Energy performance contracts are key
Energy Performance Contracts can significantly improve the chances of building owners modernising their facilities, demonstrating to them the value and financial set-up of energy efficiency measures.
From the energy service company (ESCO) perspective, energy performance contracts are a crucial way to translate and sell their services to the end-user.
Under an energy performance contract, the ESCO manages the planning, financing, implementation and maintenance of a set of technical measures, guaranteeing the energy and cost savings to the client and bearing the financial, technical and performance risks.
An example of how energy performance contracts can be leveraged effectively comes from the guarantEE project, which develops innovative energy performance contracts solutions across europe.
In the project and the presentation from Reinhard Ungerboeck, Consultant, Energy Services at guarantEE consortium member Grazer Energy Agency, there is a high focus on solving the split-incentive dilemma for energy performance contracts in rented facilities.
Innovating energy performance contracts
Ungerboeck explains: “In a nutshell, the split-incentive dilemma comes into place when you have an owner of a facility and the user of a facility who is someone else. Especially in the residential sector, the owner of the building is responsible investments into the thermal infrastructure or the heating systems of the building. Their problem is that they are not paying for the energy bills.
“The energy bills are paid by the tenant, who would profit from any measures taken, but the tenant’s problem is that they are not a mandated to do this investment.”
Typically, an ESCO would here draft up a contract to share with the building owner, who may see little benefit or return of investment when the tenant is the only recipient of energy savings. Even when building owners wish to go forward, they need a commitment from the tenant to pay forward the energy savings so they can repay the ESCOs according to the energy performance contracts.
The guarantEE project seeks to find alternatives to traditional energy performance contracts approaches. Ungerboeck says: “We have to look for a triple win situation where all three parties can make a profit from the measures, not only in financial terms, but also in terms of increased comfort, real-estate value or productivity.”
The key to this is by creating cooperation and contract between all three parties, especially the tenant and building owner.
Heat mapping energy efficiency opportunities
A different kind of energy performance documentation, being energy performance certificates, forms a crucial part of another Horizon 2020 project, ENERFUND.
ENERFUND is a tool that rates and scores deep renovation opportunities using parameters such as energy.
The ENERFUND tool is a geographic information system which can rate and score deep renovation opportunities similarly to a credit score used by banks to rate clients. This is based on a multi-criteria methodology and on a set of parameters, such as energy performance certificate data, lists of certified installers and governmental schemes.
By providing a rating for deep renovation opportunities, ESCOs or product companies can identify customer segments based on their needs, environmental department heads can assess and compare buildings when prioritising deep renovation and deciding on fund allocation, and financial institutions can provide targeted loans for building retrofits.
In addition to this, the ENERFUND tool can identify gaps between policies and needs, and increase awareness of the opportunities in the energy renovation market.
Supporting energy efficiency financing
The final presentation came from the Investor Confidence Project (ICP), which aims to unlock financing for energy efficiency projects by providing access to funding for the building, industry, district energy and street lighting markets.
A key means for supporting the energy efficiency market in obtaining financing as reported by the project is by standardising how energy efficiency projects are developed, documented and measured.
Andreas Lindinger, Management Consultant, Energy Efficiency at Denkstatt discussed his work with the Investor Confidence Project in his presentation.
Lindinger opened with the stark figure that until 2050, annual global investments in energy efficiency of $1bn are necessary to limit global warming with a probability of 66% to 2°C until 2100, according to the International Energy Agency.
He continued, explaining the four cornerstones of accelerating energy efficiency financing as providing finance, developing pipelines, building capacity, and the ICP’s key concern, standardisation.
To combat this, the ICP has developed a tool to reduce performance risk, called the Investor Ready Energy Efficiency Certification, an international framework to reduce owner and investor risk, lower due diligence costs, increase certainty of savings and enable aggregation.
To learn more about these projects, their scope and successes, watch the presentations in the tech talk ‘Project Focus: Horizon 2020 work driving energy efficiency’ on-demand today.