BOOSTING LOW CARBON INNOVATIVE BUILDING REHABILITATION IN EUROPEAN

REGIONS

Vilnius, January 17th, 2018

ESCOs: key partners to achieve an energy transition

(Spanish ESCO market)

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Growth of world economy requires an increase of energy consumption. In the next two decades this consumption is

foreseen to increase 30%

Energy Efficiency is the main driving force for decoupling economic growth and energy consumption

� Between 1995 and 2015 the global GDP growth was 73% and

the energy consumption 50%. This consumption would have

been 14% higher without energy efficiency measurements

implemented

� Energy Efficiency investments in 2015 increased in $221.000

millions (6% more than in 2014), 2/3 higher than in power

generation (IEA 2016)

� Energy Services Market has become a reality of $24.000

millions of business volume world wide

1. ESCO Model

2. ESCO Market in Spain

3. Anese Contribution

1. ESCO Model

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Energy ServiceEuropean Directive of Energy Efficiency 2012/27/UE. Art. 2 Definitions

• the physical benefit, utility or good derived from the combination of an energy with an energy-efficient technology or with action,

• which may include the operations, maintenance and control necessary to deliver the service,

• which is delivered on the basis of a contract and

• which, under normal conditions, has been shown to achieve a verifiable and measurable or estimable improvement in energy efficiency or primary energy savings

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� Companies providing energy efficiency improvement services ...

� facing some risk in doing so,

� and basing the payment of their services provided in obtaining energy savings

What are the Energy Service Companies, ESCOs ?

Definition of ESE or ESCO, according to Directive 2006/32 / EC and article 19 of RD 6/2010:

A natural or legal person who provides energy services or improves energy efficiency in a user's premises and faces some degree of economic risk in doing so.The payment for the services provided will be based (either wholly or in part) on the achievement of improvements in energy efficiency and compliance with other agreed performance requirements.

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ESCO Model: energy saving guarantees

Costs

and

savings[

€]

a0 a1 an an+1/ � / Years

ESCO

Contract

INICIAL

COST FOR

CUSTOMER

Final

Cost for

Customer

INVESTMENTS

Energy

Costs Costes

energéticosEnergy

Costs

Investment

payment

ESCO fee

Savings for

Customer

Energy

Costs

Savings

for Customer

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ESCOs: Value proposition

Energy

Services

Savings

Guarantee

TecnologyFinancing

• The ESCO

identifies,

designs and

implements the

Energy

Efficiency

Measurements

• The ESCO guarantees the energy

savings of the project

•The ESCO

provides the

financing of the

investment

PMO Skills Financing Skills

Technical Skills

Legal Skills

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FIRST ADDED VALUE: ESCOs use mature technologies that provide energy efficiency

Condensing boilers and micro-cogeneration

Heat-pumps and chillers with heat-recovering

Photovoltaic and thermal solar systems

Efficient electric motorsVariable Speed Drives Solar films

in windows

Roof and facade isolation

Daylighting,Low-consumption and LED lights

Presence detection and efficient lighting control systems in parking lots

Charging stations for PHEV & EV

Building Energy Management Systems (BEMS)

Outdoor LED lighting

Energy Savings

10

SECOND ADDED VALUE: ESCOs incorporate financing to the project, based on savings

Client

ESCO

Project financing

out of balanceTechnologies

and Energy

Services

Management fee

12

3

Guaranteed savings

4

The client doesn´t use his

financing resources

Economic Savings

11

THIRD ADDED VALUE: The technical and financial proposal is presented on a contract where the savings are guaranteed

CONTRATO DE AHORROS GARANTIZADOS

CONTRATO DE AHORROS COMPARTIDOS

1. Energy Performance Contract (EPC): savings in kWh

2. Energy Supply Contract (ESC): savings in €/kWh supplied

2. ESCO Market in Spain

link Observatorio

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Size and location of ESCOs. Anese 2015 survey (74/56 enterprises)

Revenues (mill. €)

Size by no. workers

Madrid 38%

Cataluña 15%

Andalucía 10%

85% of ESCOs are SMEs

21% have revenues over 10 mill€

Most of them are in Madrid

29% operate across Spain

34,5% work abroad (78% of them are SME)

Small Medium Large

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ESCOs achieve energy savings and provide qualified employment during 8 years

ESCO achievements in Spanish market

Energy Savings

Types of contracts (No. ESCOs)Implemented technologies

Average amount of an ESCO contract

Average duration of an ESCO contract: 7,6 years

Guaranteed savings (EPC)

Shared savings (EPC)

Mixed savings (EPC)

Energy supply contract (ESC)

Emission Savings

Economic Savings

Integrated energy contract (5P)

Own contract

ESCO profile – as per survey

Industrial applications

Building envelope

Lighting

Motors

Control systems

HVAC systems

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ESCOs contribution to national targets

ESCOs provide 20,000 direct employment with high qualification

Contribute with a 0.11% to the GDP (1.170 M€revenues)

35,9% of 2015 annual target of the National Planfor Energy Efficiency 2014-2020 has beenachieved by ESCO projects

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Public tenders for energy services

272

278

159

Average Budget (Mill €) 2014 2015 2016

Street Lighting 3,4 1,5 1,3

HVAC 1,6 0,5 1,0

Others 1,8 2,7 1,4

Number of tenders

Public issues had big impact in the number of tenders in 2016

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Market Segment ESCOs%

Public

Local councils – street lighting 44%

Local councils – schools 39%

Local councils – sport centers 37%

Public administration - Buildings 35%

Public administration - Hospitals 21%

Public administration - Universities 16%

Private

Industry 65%

Residential 44%

Hotels 42%

Retail 39%

Recreational and entertainment 37%

Market segmentation

There is no clear specialization by sector or industry

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Types of contracts and measurement and verification protocols

M&V

Average time to sign a contract (months)

Most ESCOs use:- EPC contract in the private sector- A specific one (5Ps) in the public sector

Half of them use IMPVP for M&V protocol

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Size and revenue level, technology and Social Corporate Responsibility are key to increase the success rate

Success rate

Key factors Success rate

Big size 31,17%

Revenues > 10 Mill€ 37,17%

Technology: industrial applic. 40,60%

SCR report 34,53%

1,355 Mill €

0,236 Mill €0,349 Mill €

Average amount of an ESCO contract

Success rate

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Barriers

1º Distrust on the ESCO model (ESCO credibility)

2º Lack of financing

3º Contracts too complicated

4º Outsourcing of energy management is not perceived as a benefit

5º Lack of knowledge of the ESCO model

6º Lack of information of financial an technical details of EPC model

7º Lack of governmental support

8º Lack of fiscal aids

9º Lack of compiled good practices

10º Lack of benchmark companies

There is a change in the ESCO market: few years ago, financing was the first barrier, nowadays confidence is the first one

Barriers

4. Anese Contribution

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Key areas of ANESE

ESCO

Energy

Saving

Contracts

TecnologyFinancing

CO2

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ESCO certified classification

IPMVP®

LEED

Measurement

and

verification

protocol

Energy

Manager

Sustainable

buildings

ESCO

certification

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ANESE has established a classification defined in 2014 and lunched in February 2015 that:

� It is addressed to ALL ESCOs that wish to be classified

� Provides clarity in the market

� Distinguishes specialized and professional companies

� Indicates the business horizon

Certified Classification of ESCOs: trust is the key point to improve the ESCO model

Specialities:

• Lighting

• Engines

• HVAC Systems

• Regulation and control

• Isolation

• Industrial applications

16 certified companies

22 in-progress

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Energy services integrate technology, financing and professional services for a wide period of time, this incorporates a complexity in the common public tenders

Lawyers

ESCOs

Politicians

Secretaries of Secretaries of the

municipality

¿Others?

PRECEDURE

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GUIDE TO DEFINE THE TECHNICAL CLAUSES IN A ENERGY PERFORMANCE CONTRACT TENDER

Based in our experience, we have written a set of clauses to improve the public tenders, covering:

8. Billing, price revision and penalties

9. Measurement and Verification protocol

10. Certification of the ESCO

11. Ownership of the equipment and systems

12. Exclusions

13. Cancellation of the service. Resolution of the contract

14. Settlement

1. Type of contract

2. Object of the contract

3. Benefits and SLAs

4. Savings guarantee

5. Time of execution

6. Preventive and corrective maintenance

7. Financing

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GT Tecnología• ESCO model

• Methodology• Contracts• Energy audits• Financing and insurance• Measurement and verification• ESCO classification

• 22 technologies• Description• Energy saving• Regulation• Advice of use• Sectors of application

• Good practices•Success stories (projects)•Energy Saving Measures carried out•Technologies used•Savings achieved•Investment

Technology guide (download www.anese.es)

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ANESE Financing Program

Specialized Private Equity

Funds

Projects Clients

ESCOs members of ANESEESCOs members of ANESE

Matching project needs and investment funds requirements, by• Project assessment and screening

(using ICP criteria)• Project aggregation in portfolios• Procedure formalization

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Private equityfirm

Minimuminvestment by

portfolio

Minimuminvestment by

project

Repaymentperiod (years)

Project type Contractownership

SUSIPartners

2 M€ - 5..10 Greenfieldor

Brownfield

ESCO

SI Capital 1 M€ 0,5 M€ 5..25 Greenfieldor

Brownfield

SPV, Others

SUMA Capital 2 M€ 0,5 M€ ≤ 10 Greenfieldor

Brownfield

SPV

Basic requirements (and procedure)

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Some references• 10 Public Street Lighting contracts with more than 10,000 points. (10-12 years)• 3 Hotels• 2 Shopping Malls• 2 Private Office Buildings• 8 Residential Buildings•16 Municipality Buildings

The ESCO Company

� Energy Services Company (ESCO) based in Seville, established in 2010

� It covers the complete cycle of energy services: design, supply, installation, maintenance, guarantee and financing

� 100% private property, 100% Andalusian equity

� Fully independent of energy marketers, equipment manufacturers and distributors or comprehensive maintenance companies

� Betting on technology and innovative own solutions

� “Collaborating Entity” of “Andalucía es más” program

� Since 2015 most project financing are made through a SPV shared with SUMA Capital

www.cactus2e.com info@cactus2e.com

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Add an ESCO to your team as expert in energy management

www.anese.es+34 91 737 38 38anese@anese.es

Energy Savings

Emissions Savings

Economic Savings

Francisco Cácereswww.cactus2e.cominfo@cactus2e.com