HELLEN ODEGI ENERGY EFFICIENT PROCUREMENT

Transcription

1 HELLEN ODEGI ENERGY EFFICIENT PROCUREMENT

2 ENERGY EFFICIENCY PROCUREMENT WHAT IS ENERGY EFFICIENCY PROCUREMENT? Energy Efficiency Procurement refers specifically to purchasing energy efficient products that will consume less electricity, water and effectively less energy.

3 WHY ENERGY EFFICIENCY PROCUREMENT? Rising electricity prices Energy efficiency trends Growing climate change Increasing regulation Customer expectations Corporate social responsibility

4 ENERGY EFFICIENT PRODUCTS HAVE A LOWER TOTAL COST OF OWNERSHIP When choosing among alternatives in a purchasing decision, buyers should look not just at an item's short-term price but also at its long-term price, which is its total cost of ownership.

5 TAKING ACCOUNT OF ENERGY EFFICIENCY IN PROCUREMENT Energy efficient procurement provides the initiative to begin a transition from initial cost only method to life-cycle cost based purchasing methods and culture.

6 IMPORTANCE OF ENERGY EFFICIENCY IN THE PUBLIC SECTOR Energy efficiency is a cost effective solution for reducing the energy supply demand gap and mitigating climate change impacts, without compromising economic development. Energy efficiency options offer a win win win solution to governments, to energy users, and to the environment.

7 The public sector is often the single largest energy user in a developing country. Energy use in the public sector is generally very inefficient because of the use of old equipment, inadequate maintenance, limited budgets for purchasing efficient equipment, and lack of knowledge and awareness of energy efficiency options on the part of public agency managers and staff.

8 ENERGY SAVINGS PERFORMANCE CONTRACTS ESPCs are used to implement energy efficiency projects on a turn key basis. The compensation to the ESP is generally based on demonstrated performance in terms of energy and/or energy cost savings. The ESPC allows host facilities to mobilize private capital and pay for energy efficiency upgrades from future energy cost savings. Most of the technical, financial, construction and performance risks are borne by the ESP.

9 BARRIERS TO ENERGY EFFICIENCY Policy and regulatory barriers such as low energy prices, rigid procurement and budgeting policies, limitations on public financing, ad hoc planning, and limited and poor data.

10 Public sector end user barriers include limited incentives to save energy, no budgets for special projects or upgrades, unclear ownership of cost and energy savings, limited availability of financing, lack of awareness and technical expertise, and behavioral biases. For energy efficiency equipment and service providers, barriers include high project development and transaction costs, perceived risk of late payment or non payment, limited technical, business and risk management skills, and limited access to equity and debt financing.

11 Financing barriers include high perceived public credit risks, need for new technologies and contractual mechanisms, small project size and relatively high transaction costs, and lack of interest on the part of bankers in energy efficiency project financing. OVERCOMING THE BARRIERS Policy measures, procedural changes, information programs, and incentive mechanisms. This includes establishing minimum energy performance standards and facilitating energy savings performance contracts

12 ESPCs are used to implement energy efficiency projects on a turn key basis. ESPCs include design, engineering, construction, installation, commissioning, and measurement and verification (or M&V) services ESPCs have traditionally been carried out by Energy Service Companies, but may be offered by a range of other organizations from equipment suppliers to utilities to construction firms

13 The compensation to the ESP is based on demonstrated performance in terms of energy and/or energy cost savings. The ESPC allows host facilities to mobilize private capital and pay for energy efficiency upgrades from future energy cost savings. Most of the technical, financial, construction and performance risks are covered by the ESPC

14 ESPCs can address many of the issues related to improving energy efficiency in the public sector, such as: Reducing the transaction costs Transferring technical risks away from public end users Providing technical and logistical capabilities Providing training and capacity building Facilitating access to external capital and flexible financing

15 WAY FORWARD: RECOMMENDED APPROACH Energy Service Providers Established Beginning with simpler models and introduce more complex transactions only as the market develops and supporting systems evolve. ESPC models developed in some of the Western countries can be important in understanding the range of options, but they may need to be customized and adapted, and many incremental changes made, before they are workable in developing countries.

16 RECOMMENDED APPROACH : 1. Conduct market survey to assess the presence, capacity and interest of ESPs, identify the key barriers to using ESPCs in the public sector 2. Hold stakeholder consultations 3. Develop and test small procurements 4. Expand and replicate the successful schemes 5. Institutionalize the systems to facilitate the long term development of the market and the ESPC process.