ChangeBest
Promoting the development of an
energy efficiency service (EES) market
Good practice examples of changes in energy service business, strategies, and
supportive policies and measures in the course of the implementation of Directive
2006/32/EC on Energy End-Use Efficiency and Energy Services
FIELD TEST – LATVIA: Save buildings by saving energy!
IEE/08/434/SI2.528383
Project Duration: 01.06.2009 – 31.05.2012
26.01.2011
PROJECT SUMMARY
• The ChangeBest project with its 20 project partners
and more than 50 partners from practice aims at
supporting the implementation of the EU Energy
Service Directive, as well as at contributing to a further
development of the energy efficiency service market.
• In order to achieve this, new energy (efficiency)
services are developed and promising energy
efficiency service business cases and strategies are
implemented, both in close cooperation with energy
companies and energy service companies.
BACKGROUND
– A main objective of the Energy Service Directive is to
stimulate the market for energy services and for the delivery
of other energy efficiency improvement measures to final
consumers.
– Against this background it is important to know:
• How and to which extent can the energy efficiency service market
be further developed?
• What are appropriate business strategies and promising services
not only for „advanced“ companies but also for „beginners“?
• What is the suitable policy framework for stimulating market
development and for overcoming existing barriers?
• Which role can ESCOs and energy companies developing towards
sustainable energy service companys play?
OBJECTIVES AND MAIN STEPS
– Main objectives of ChangeBest are to:
• Assist energy companies and energy service companies in
entering the B2B and B2C market for energy efficiency services
• Contribute to the development of the energy efficiency services
market as part of the implementation of the Energy Service
Directive
• Demonstrate good practice in implementing the Energy Service
Directive
– This will be achieved by:
• An empirical analysis of the energy efficiency service market and
the respecitve economic and policy framework
• A field test of new and/or improved energy efficiency services in
cooperation with several energy companies and energy service
companies
FIELD TEST – LATVIA:
SAVE BUILDINGS BY SAVING ENERGY!
• ESCO and Energy Performance Contract in
multifamily houses:
– The basic idea is taken from the public, commercial
and industrial sector
– An ESCO is a company that offers energy services
which may include implementing energy-efficiency
projects (and also renewable energy projects) and
in many case on a turn-key basis
FIELD TEST – LATVIA:
SAVE BUILDINGS BY SAVING ENERGY!
• The three main characteristics of an ESCO:
1. ESCOs guarantee energy savings and/or provision of the same level of
energy service at lower cost
2. The remuneration of ESCOs is directly tied to the energy savings
achieved
3. ESCOs can finance, or assist in arranging financing for the operation
of an energy system by providing a savings guarantee.
• The scheme has been adapted and adjusted to the
residential sector for comprehensive building renovation
in Latvia:
– Important driver availability of structural funds
– High heat energy tariff
– Suitable and well organised house management company
http://re.jrc.ec.europa.eu/energyefficiency/ESCO/index.htm
FIELD TEST – LATVIA: Save buildings by saving energy!
THE BUSINESS CASE IN BRIEF
• The vast majority of existing multi-family
buildings in Latvia, and Eastern Europe in general,
have not undergone any major energy
conservation improvements
• Average consumption of heat in buildings in
Latvia ranges from 220-250 kWh/m2/year.
• Average consumption of heat in buildings of 110140 kWh/m2/year (or less) is possible.
• Often the residents are paying high energy bills
and still receiving unsatisfactory service
FIELD TEST – LATVIA: Save buildings by saving energy!
BUSINESS MODEL
• Comprehensive renovations of buildings based on Energy
Performance Contracts (EPC)
• The Energy Performance Contract:
– collective agreement with the apartment owners
– 10 to 20 years agreement depending on investment level and
energy tariff
– all residents are guaranteed comfortably heated apartments
(21.5 C)
– that flat-owners will pay for the amount of energy that the
building would have consumed had it not been renovated
– calculation based on historic energy consumption data of the
building (baseline study)
– The difference between this theoretically calculated amount of
energy, and the real energy consumption after the renovation,
flows to ESCO.
FIELD TEST – LATVIA: Save buildings by saving energy!
WHAT IS “COMPREHENSIVE RENOVATIONS”
• Preventing heat loss out of the building envelope
• Preventing losses in circulating heat and hot
water through the building
• Preventing overheating in apartments by
reducing heat delivery in times when it is not
needed
• Repairs or improvement to halt and prevent
structural problems caused by corrosion
• Discretionary improvements to the looks, comfort
and overall impression of the building, which can
best be done as part of the overall renovation.
THE PLANNING AND RENOVATION PROCESS
• In total the process for one building takes 12-15
months:
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–
–
–
–
–
–
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Pre-selection of Buildings and Cost-Benefit Analysis
Resident Principal Approval of EPC
Energy and Technical Audits
Project Design and Signing Final EPC
Cost Estimate and ERDF application
Tender procedure
Actual construction work
Building into exploitation and receipt of subsidy
FIELD TEST – LATVIA: Save buildings by saving energy!
RENOVATION WITH ESCO
House management company
Building
Payment of bills
Residents
Haouse management
services
Payment for energy savings
Long term contract
ESCO
Renovation
Payment for energy
comfort guarantee
Energy audit
Project design
Construction
Investment
Maintenance
FIELD TEST – LATVIA: Save buildings by saving energy!
THE BUILDINGS
• Almost all energy saving measures extend the lifespan of the buildings;
• Comprehensive renovation:
– prevents further decay and corrosion of the building envelope
– guarantees the safety and continued functioning of the internal networks.
– provides good living spaces for Latvian families for at least another 20-30
years.
• The living conditions of inhabitants, the value of their property and their
pride of their house and neighbourhood will rise and their maintenance
cost will drop.
• heating bills will drop by 50% or more at the end of the contract period.
• Without a comprehensive renovation
– the maintenance of buildings will become ever more expensive and complex
– eventually leading to unlivable and worthless buildings
FIELD TEST – LATVIA: Save buildings by saving energy!
THE RESIDENTS
• The mass privatization of apartments in the 1990’s has resulted in over
90% occupant-owners.
• Many residents are cash poor (low incomes with comparatively high
heating bills), but asset rich (ownership of debt free apartment).
• Except for a small percentage of flats there is no rental stock or
institutional ownership by large public or private entities.
• Decisions about the maintenance of apartment buildings lie with each and
every individual apartment owner.
• Flat-owners are typically not able to agree on investments and organize
the much needed renovation process by themselves.
• They lack the required technical and organizational skills and many
residents, especially the elder generations, are very risk averse.
• Many are scared of any extra financial obligations, or changes to the status
quo.
• Often residents are not aware of the need and technical options to lower
their energy consumption.
• Additionally, residents are used to a high state involvement
FIELD TEST – LATVIA: Save buildings by saving energy!
THE RESIDENTS AND ESCO
• The ESCO investment model is ideally suited for the housing conditions in
Eastern European
• It takes all the financial and technical risks and decision-making away from
the residents and places them with a professional third party.
• The fact that not residents, but the ESCO takes a bank loan is an especially
important reason for residents to go for the ESCO scheme.
• In any case, as everywhere else in the world, it is not easy for a flat-owner
to simply walk away from the utility bills without eventually loosing his
property. In Latvia buyers of flats always check if the previous owner has
arrears in heating and maintenance bills and these need to be paid before
a sales contract is signed.
• Only in case a bank holds a mortgage on the flat for an amount larger than
the forced sale value, could the maintenance company end up never being
paid.
• ESCO will not take on a renovation in a building with high debts or a
significant number of excessively high mortgages.
FIELD TEST – LATVIA: Save buildings by saving energy!
HOUSING MAINTENANCE COMPANIES
• Currently municipal housing maintenance companies have been
officially privatized, but with the municipality as only shareholder.
Some have been sold to private owners (Cesis). New private
housing management companies have emerged but often they are
very small and consist only of a few bookkeepers and handymen.
• People are generally very angry and distrustful towards housing
management companies.
• This is a problem for ESCO because this general negative and
distrustful attitude reflects on anybody trying to introduce changes
and improvements.
• The ESCO also relies on the local management company to perform
most of the day to day duties in running the buildings.
FIELD TEST – LATVIA: Save buildings by saving energy!
HOUSING MAINTENANCE COMPANIES
• This is an opportunity for municipality to improve the sector
• There are also a few management companies, which have
transformed themselves in recent years (Cesis and Valmiera).
• The EPC specifies the role of the housing management company in
collecting payments and performing maintenance for the building
and thereby actually executes many of the EPC provisions.
• The housing management company provides financial guarantees
to ESCO for the payment collection services, taking the full
responsibility for management of late payments and debt recovery.
In this case both parties agree on mutually beneficial conditions.
• In cases when the management company cannot ensure such
guarantees, alternative solutions can be applied for the collection of
late payments and debt recovery (for example, it can be done by
the ESCO itself or subcontracted to third party).
FIELD TEST – LATVIA: Save buildings by saving energy!
CONCLUSION
• City councils and municipal maintenance
companies are eager to see their housing stock
improved but currently struggle to make use of
available EU subsidies.
• Residents lack the know-how and organizational
capacity and are usually not willing or able to
organize the co-financing
• ESCO offers a solution
• The city administration organizes the first contact
with the elders of the buildings and the housing
management companies
THANK YOU!
Ekodoma
3-3 Noliktavas Street, Riga
LV1010, Latvia
Tel: +371 7323212
Fax: +371 7323210
Mob: +371 26745700
email: claudio@ekodoma.lv
Web side Ekodoma:
www.ekodoma.lv