NOVICE project proposes new energy efficiency business model

The Horizon 2020-backed project aims to unlock billions in energy efficiency investments and fast-track investment returns.
Published: Wed 02 May 2018

The NOVICE project offers the development of an innovative business model for energy efficiency and demand response programmes.

The institution responsible for coordinating the project is the International Energy Research Centre (IERC), an Irish centre focused on integrated sustainable energy systems. The project kicked off in June 2017, and in August IERC was selected by the European Commission’s Horizon 2020 programme to execute the €2m project, which will have a total duration of three years.

NOVICE seeks to bring an innovative approach in building retrofitting to improve energy efficiency and demand response. Its ultimate intention is to develop and demonstrate a business model that can enable significant investments in energy efficiency, achieved through providing energy service companies (ESCOs), facilities managers and other involved parties two separate revenue streams from realising energy upgrade projects.

The model intends to provide a faster return on investments made in energy efficiency, which is an asset that can make it more appealing to business owners and operators.

Offering a noticeably faster repayment of investments can become a convincing argument for customers to close deals on energy efficiency - it is often hard to sell energy efficiency, as the prospect of spending large sums of money immediately to get a gradual return in the form of energy savings is not attractive to many.

Understanding the business model

With increasingly stringent regulations in the EU seeking to drive energy efficiency in buildings, there is a variety of benefits that can be achieved from retrofitting and renovating to improve efficiency. Such measures result in lower bills, better indoor environments, improved environmental rating of buildings and, finally, a higher real estate value.

With this in mind, the NOVICE project is set on making energy efficiency a much more attractive selling point. The differential is that it offers participants two revenue streams, instead of only relying on repayments coming through energy savings that result from the renovations: the additional revenue stream comes from providing grid services.

NOVICE already sees buildings as the future of decarbonised energy systems, since they can provide flexibility with on-site, behind-the-meter energy production and storage.

As a consequence, whenever there is an investment towards energy efficiency by selecting those energy systems (such as HVAC, CHP, PV, heat pumps, BEMS and others), the building can become smart as well as efficient. These are the energy systems that can provide both efficiency and flexibility, if the appropriate ICT systems are used.

An example of a grid service opportunity is the provision of demand response services to distribution systems operators (DSOs) and transmission systems operators (TSOs) by using distributed energy resources (DERs).

According to the IERC, the combination of these systems and services provides better insights into the energy performance of the building, resulting in optimised energy use. This kind of smart building can then generate revenues by both achieving energy savings and providing grid services.

As such, that would result in fast-tracked repayment of energy efficiency investments, by combining revenue streams from both energy savings and grid services into one offering. Dr Matthew Kennedy, Business Development Manager at the IERC, calculates that NOVICE aims to make more than €20.8m of investments available throughout its three-year duration.

An illustration of the business model proposed by the NOVICE project, including the roles played by each party.

From ESCOs to aggregators: bridging industry actors

One of the ways in which NOVICE innovates is by bringing together relevant actors involved in the energy upgrade process.

The NOVICE project consortium comprises ESCOs, financing institutions, facilities managers and owners, engineering consultants, research institutions and energy aggregators.

According to Professor Tony Day, Executive Director of IERC, “This energy efficiency research award recognises the importance of industry driven, collaborative energy research and its contribution to our future sustainable energy systems.

“[The IERC’s] innovation will enable both Irish ESCOs and aggregators to seamlessly collaborate in exploiting economies of scale, while providing a platform for both to share risk in the implementation of building energy renovations.”

Having a dedicated consortium of companies on hand is a valuable differential for the project to achieve its mission: to demonstrate real-world applications of its business model, measuring its success and shortcomings by looking at real energy upgrade projects. The partners involved will be able to evaluate the suitability of different technologies for energy savings and demand response in the buildings. This can be achieved with the use of thorough building energy modelling.

Additionally, the partners will be able to draft energy performance contracts together - which highlights the collaborative element between, for instance, ESCOs and energy aggregators. They will also monitor and verify both energy savings services and demand response services.