ESCo market development: A role for facilitators to play

Panel: 3. Local action and national examples

This is a peer-reviewed paper.

Authors:
Jan W. Bleyl-Androschin, Energetic Solutions, Austria
Lieven Vanstraelen, Energinvest, Belgium
Nathalie Adilipour, Swedish Energy Agency, Sweden
Markus Bareit, Swiss Federal Office of Energy (SFOE), Switzerland
Charles-Henri Bourgois, Factor4, Belgium
Johan Coolen, Factor4, belgium
Ger Kempen, Escoplan, The Netherlands
Kil-Hwan Kim, Korea Energy Management Corporation (KEMCO), Republic of Korea
Hye-Bin Jang, Korea Energy Management Corporation (KEMCO), Republic of Korea
Sung-Hwan Cho, Jeonju University, Republic of Korea

Abstract

Energy-Contracting is a many times proven ‘delivery mechanism’ to implement demand side energy efficiency and (renewable) supply projects in buildings and industries. However market volume is behind expectations in comparison to market potential forecasts and its contribution towards energy policy goals.

There is plentiful empirical evidence (e.g. from public institutions putting out tenders for ESCos to bid on) and growing awareness among stakeholders, that successful energy service market development requires a strong commitment and a ‘driving position’ on the client side. In this paper we want to find out, what the challenges and barriers are on the client side of the energy service market, when setting out to procure energy services? Which know-how, procedures and organizational change processes are needed? And how can potential clients be enabled to do so?

The analyses reveals a need for a broad and interdisciplinary range of activities and know-how such as project development and communication skills, interdisciplinary feasibility studies, life cycle cost analyses, “make or buy” decisions, structuring of business and financing models, procurement specifications and procedures, legal advice and contracts up to quality assurance, measurement and verification (M&V) of the project performance.

As a solution, we have found that so called ‘Facilitators’, who mostly consult on behalf of a client, can play an important and enabling role and have successfully done so. Besides enabling project development, another important advantage of this buyer-led approach is to foster competition between ESCos, other EE suppliers but also financiers. Likewise important, the Facilitator approach provides a fair and level playing field for this competition. Another Facilitator role is to serve as an intermediary between clients and ESCos ‘(corporate) cultures’, interests and expectations in different phases of the project cycle.

However we also want to raise awareness among Facilitators and other stakeholders, that the identified organizational needs for change require approaches beyond economic rationale or environmental awareness. Instead psychological and organizational change processes need to be put on the agenda, even though this may be new territory for most energy efficiency professionals.

Project facilitation cost in the more developed facilitation markets turned out to be on average at about 3 % of the investment cost for the demand side measures, decreasing with project sizes. In a first approximation this is about one half order of magnitude below standard engineering cost. However this up-front investment often constitutes an obstacle for project development and we would like to raise the attention of policy makers to this opportunity to support market development. It was also repeatedly mentioned by clients and Facilitators, that through an intensive (but fair) competition between suppliers, the advantages achieved with regard to prices and quality outweigh the initial facilitation cost by far.

To our knowledge, the figure of the Facilitator is hardly mentioned in the literature. The goal of this paper is to create a scientific reference of the project and market Facilitator case for further discussions. Furthermore we want to demonstrate the added value of a wider application of Facilitators for ESCo market development and provide guidance for facilitation services and activities as well as policy recommendations.

Methodically, the research builds on an analyses of a typical energy services project life cycle, primarily from the perspective of a client, taking a ‘negotiated procedure’ as the procurement model. Existing ‘Facilitator’ services and activities were identified through interviews with ESCo clients, Facilitators and ESCos in six European countries and Korea. This was also the source for an economic analyses of project facilitation cost, which relies on empirical data from 32 “real world” projects. For the analyses of change processes, we refer to Kurt Lewin’s model of change and take a first approach to apply it to client organizations and its individuals who want to outsource demand side energy projects.

We believe the Facilitator approach will need to be multiplied and better funded to foster ESCo market development. It will also need to become a standard procedure in public and private sector administrations in order to support structuring and procuring of comprehensive energy service projects. This is particularly true, if the market is to develop from individual projects, led by highly motivated individuals, to mass roll-outs of comprehensive building refurbishment portfolios. Only then will the energy services industry be able to provide more significant contributions towards energy policy goals.