Task 2.1: National Report on the Energy Efficiency Service ......In Italy, the market for energy efficiency services has developed following a uneven ... Energy efficiency in industry

Task 2.1: National Report on the Energy Efficiency Service Business in Italy

eERG

Change Best: Promoting the development of an energy efficiency service (EES) market – Good practice examples of changes in energy servi ce business, strategies, and supportive policies and measures in the course of t he implementation of Directive 2006/32/EC on Energy End-Use Efficiency and Energy Services.

A project supported by the Intelligent Energy Europ e Programme of the European Commission (IEE/08/434/SI2.528383).

A main objective of the Directive 2006/32/EC on energy end-use efficiency and energy services (ESD) is to stimulate the market for energy services and for the delivery of other energy efficiency improvement measures to final consumers. In order to achieve this objective, the ESD gives a special role to energy distributors, distribution system operators and retail energy sales companies. On the other hand, there are different types of "pure" energy service companies (ESCOs) in the market ready to expand their business in the field of energy efficiency services (EES). Against this background, it is important to know, how and to which extent the EES market could be further developed, what are appropriate business strategies and promising services not only for “advanced” companies but also for “beginners”, what is a policy framework suitable to stimulate market development and to overcome existing barriers, and which role energy companies developing towards sustainable ESCOs could play. The main objectives of ChangeBest are:

o to assist energy companies and ESCOs in entering the B2B and B2C market for EES,

o to contribute to the development of the EES market as part of the implementation of

the ESD,

o to demonstrate good practice in implementing the ESD.

In order to achieve the objectives specified, the project work will consist of:

o empirical analysis of the EES market and the respective economic and policy

framework in the course of the implementation of the ESD,

o exchange of experiences, national workshops and a European conference,

o a large bundle of promising EES business cases and strategies implemented in “field

tests”,

o communication and dissemination activities, and

o induced further action and networking by energy (service) companies.

For the purpose of this paper, the following definitions have been applied:

o Energy Efficiency Service (EES): Agreed task or tasks designed to lead to an energy

efficiency improvement and other agreed performance criteria. The EES shall include

energy audit as well as identification, selection and implementation of actions and

verification. A documented description of the proposed or agreed framework for the

actions and the follow-up procedure shall be provided. The improvement of energy

efficiency shall be measured and verified over a contractually defined period of time

through contractually agreed methods [prEN 15900:900].

o Partial services connected to EES: Services that just include parts (“components”) of

the EES value chain like energy audits, but are designed to directly or indirectly lead

to an energy efficiency improvement

Milan, September 2009

Project Partner Country Wuppertal Institute for Climate, Environment, Energy Germany e7 Energie Markt Analyse GmbH Austria SEVEn Czech Republic ESB - Energy Saving Bureau Estonia ARMINES France EDF – Electricity of France France ASEW - Germany ULUND - Lund University Sweden HELESCO S.A. Greece eERG - Politecnico di Milano - Energy Department Italy Ekodoma Latvia ISR – University of Coimbra Portugal ECN - Energy research Centre of the Netherlands The Netherlands BSREC - Black Sea Regional Energy Centre Bulgaria Energy Piano Denmark REACM - Regional Energy Agency of Central Macedonia Greece KISE - Krakow Institute for Sustainable Energy Poland CESYS - Center for Energy Systems Slovakia IJS - Jozef Stefan Institute – Energy Efficiency Centre Slovenia ESCAN, S.A. Spain

Project coordinator: Wolfgang Irrek Wuppertal Institute for Climate, Environment, and Energy Döppersberg 19 42103 Wuppertal, Germany E-mail: [email protected]

Authors :

Nathalie Sabbatucci Nicola Labanca eERG - Politecnico di Milano - Energy Department

Table of Contents

Executive summary.................................. ...................................................................................5

1 Introduction..................................... ..........................................................................................8

2 Overview of the national EES market and its marke t players.......................................... ....9

2.1 Number and types of EES providers...............................................................................10

2.2 Size of EES market .........................................................................................................13

2.3 Existing incentives and barriers for EES.........................................................................13

2.4 Policy mix and development of EES ...............................................................................16

2.5 (Potential) competitors and (potential) partners in the EES market ...............................21

3 Analysis of market segments and opportunities for Energy Companies and ESCOs....23

3.1 Existing EES market offer sector by sector.....................................................................23

3.2 Analysis of potential needs for EES in the different demand sectors .............................26

3.3 Positioning of energy companies and ESCOs in the different demand sectors .............27

3.4 Positioning of energy companies and ESCOs in the value chain of EES products........28

3.5 Main EES types provided, fields of application and technologies ..................................30

3.6 Energy Efficiency Service financing................................................................................33

3.7 Most commonly adopted and promising marketing strategies in the EES market sectors considered ......................................................................................................................39

3.8 Summary on existing EES market offer ..........................................................................40

3.9 Summary of potential needs for EES in the different demand sectors ...........................42

4 EES product and business strategy good practice e xamples...........................................4 7

5 Interviews of representatives of Italian ESCOs an d energy companies...........................51

ANNEX I: Summary information to be reported in tabl es 8,9,10 and 11 ..............................61

ANNEX II: Summary information to be reported in tab le 12 .................................................64

6 References: Expert interviews carried out and fur ther sources used ..............................65

National Report on the Energy Efficiency Service Bu siness in Italy

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Executive summary

In Italy, the market for energy efficiency services has developed following a uneven pattern because energy service providers have always privileged large project-sizes as they are more profitable, thereby leaving out large potentials of energy savings existing in smaller realities such as small and medium companies, or households. This type of market evolution is strongly reflected in the results illustrated in this report. In particular we will see that because large projects were always favoured over smaller ones (though it is not the only reason), the sector where most interventions on energy efficiency have taken place is the public sector, starting from healthcare. The private sector is presently much less developed, especially in the residential case, precisely because of small project sizes. Energy efficiency in industry is growing though it is constrained by financial issues.

The uneven market development pattern is also reflected in the supply segmentation. The market of energy efficiency service (EES) offers is divided between large multi utility companies, energy distributors, retail energy sale companies, consulting companies and others, whose core business is rarely that of EES per se, and small “pure” ESCOs (whose core business is EES): the former typically operate on large projects and the latter on small projects, mainly due to different financial capacities. In any case, as also emphasized by the experts interviewed, the greatest market development potential lies in small and medium sized projects (small industry and households).

We will see in the report that “pure” ESCOs tend to prefer operating in the sectors of efficient electricity production, lighting services and efficiency of electrical drives, which are more commonly used in the private sector (in particular the industrial and commercial sectors) while non pure ESCOs favour the public sector for the provision of EES. This derives from the fact that large companies (commonly non pure ESCOs) hold greater chances of winning tender procurements from local and national governments, while they face difficulties in customizing and rendering profitable the implementation of small and medium projects of energy efficiency. Hence pure ESCOs, typically smaller independent companies, are more oriented towards the private sector, where SMEs represent a huge untapped market potential in some areas and allow more space for specialisation and market differentiation.

Therefore, it was found that the largest market potential lies in the services offered to SMEs that by definition require small and medium-sized projects. In this section of the market, competition is close to non-existent as the number of ESCOs is very limited compared to market demand and multi utility companies are hardly participating in it. Commonly, large companies only offer ready-made services prepared for large projects which are not easily adaptable to smaller project sizes. This highlights the strategic and competitive importance of EES customization, however technological research and innovations in this area are underdeveloped. A disincentive to customise services consists of the standardized projects publicised by Italian Authority for Electricity and Gas (AEEG) in order to facilitate the acquisition of white certificates.

Financing is a very important issue in the EES market as it constitutes a significant barrier to small and medium sized EES providers in implementing large EE projects and also limits the degree of competition in the EES market as it separates the supply market into different groups: some projects can only be implemented by financially strong companies while others also by financially weaker companies. Such market segmentation restricts market competition to a wide extent and therefore slows down EES market development. The types of financing most commonly used are EES provider funding or third party financing (through financial institutions), while the most


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important indicator for a project’s viability is often considered to be the investment’s payback period.

EES market contracts are another open question to discuss. Ideally, energy saving should be obtained through energy performance contracting, however, this is not often the case. The first contracts that appeared in Italy in the 1980’s were based on the provision of a turnkey service, quantifiable for instance in degree days (for buildings’ temperature), hours (for instance in lighting services) or in volume (for hot water) and were known as “servizio calore” (heating service). These contracts only covered the management and maintenance of e.g. a boiler, without obligations in case of damage (i.e. the client simply had to purchase a new boiler in case of damage). A law in 1991 (10/91) widened the scope of such contracts including also the installation of new boilers, and introducing technical rules for maintenance. Later on, the so called “servizio energia”1 (energy service) was developed as a supply contract allowing for the explicit forecast of energy savings inside the contractual text, and providing for “qualified detention” – new plants remain under the ownership of the provider until the contract is over; however, service fees were not tied to energy savings achieved. Later on, “servizio energia plus” was introduced as an extension of the previous “servizio energia”; the new contract also included the commitment by the provider to reduce the consumption of primary energy for winter heating of at least 10% with respect to what is indicated in the “Certificazione Energetica” (energy certification)2 and the installation, where possible of a thermo regulating system (e.g. thermostatic valves). Finally, the 2000 Budget Law (art 30, paragraph 8.e) identified the Global Service contractual formula as best suited to govern the provision of different and interrelated services by a single provider in the public sector, ensuring high levels of efficiency and management effectiveness so this type of contract is also used a lot but it remains more similar to traditional supply contracting than to energy performance contracting.

Barriers to EES market development can be grouped into three categories: barriers related to policy and regulation, barriers related to the EES supply side and barriers related to the demand side. Concerning regulation, the most significant barrier derives from the lack of implementation decrees to back up current regulation. Looking at barriers for the supply side, critical factors are the payback period (due to the technical and financial risks associated with each EES contract) and access to capital for SMEs which represent an obstacle for the ESCO business. The most relevant barrier from the demand side lies in the low level of understanding in general, lack of information and scepticism and in particular in a limited understanding of energy efficiency improvement opportunities, especially through energy performance contracting and third party financing. The perception of risk is also very high among potential customers if they are required to provide a high initial capital investment to implement the project. Furthermore, consumers interested in energy services also have to face burdensome administrative procedures and high transaction costs for small project-sizes.

In Italy direct policy instruments supporting energy service companies are decentralised and therefore mostly implemented at regional level. The national government mainly intervenes through the introduction of tax rebates and the institution of funds devoted to the fostering and development of innovation and entrepreneurship in energy efficiency. While some incentives (such as the existing white certificate mechanism) are in principle applicable to all energy efficiency improvement interventions, others are specific to some types of activities (e.g. the so-

1 “Servizio Energia” is described in article 1, paragraph 1, letter p), of the presidential decree DPR

26.08.1993, no. 412 2 Energy certification for buildings became obligatory with the issue of the legislative decree Dlsg. 192/2005 (art. 6 paragraph1-bis, letter c)).


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called “conto energia” for microgeneration of renewable electricity by a final user) or sectors of intervention (e.g. residential, industrial). Also, some of the incentives are granted on the basis of calls for tenders and are therefore only temporary, subject to a deadline for application; this type of incentive is usually applied to interventions in the public sector. Concerning white certificate incentives, they have so far usually represented only an additional cash flow for ESCOs and EES providers but have not usually been the main driver for the implementation of the certified energy efficient projects that represent EES providers’ core business. However, things may change in the next years. Considering that the energy saving potentials of so-called “low-hanging fruits” (i.e. CFLs, low flow showerheads, faucet aerators, etc.) responsible for most of savings realised in the past will likely to be soon exhausted, and considering that the energy saving targets for electricity and gas distributors will be markedly higher, the white certificate scheme might actually determine a significant increase in the implementation of energy efficiency projects with higher investment costs and higher returns during the next years.

As far as market strategies are concerned, we identified two market strategies very commonly adopted by EES providers: one derives from the fact that initially, energy efficiency improvement measures were only demanded by the public sector so that good knowledge and “use” of public procurement rules is seen as an important competitive asset. Unfortunately, the public-decision making process is not entirely based on project assessment and lifecycle cost analysis but rather on the total cost of the project (net present value) and on the predicted energy savings. Hence, competitiveness is not generally determined by project characteristics and quality of services offered but rather on experience in public tenders.

The other strategy is preferred by smaller EES providers, so especially pure ESCOs which are not yet numerous enough to feel the pressure of competition and thus the need to innovate and invest in research and development. Where there is some level of competition, service customisation is the most important asset. The most delicate project phase for pure ESCOs is the initial energy audit carried out to assess energy consumption levels, estimate potential energy efficiency gains and thus establish future energy savings to be achieved through project implementation. This is a crucial phase because ESCO profits are directly linked to the level of energy savings achieved by the project itself.


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1 Introduction

The present report has been written based on the information available in the existing literature, the insights provided by 5 experts of the Italian EES market and 15 representatives of ESCOs and energy companies who have been interviewed on the topics herein covered.

While chapter 2 provides an overview of the Italian EES market in terms of numbers and types of EES providers operating in this market, EES market volume, existing market barriers and incentives, existing energy policy instruments influencing the market and relationships that are or might be established among the various market actors, chapter 3 analyses the various market segments and the existing opportunities for ESCOs and energy companies. Potential needs for new EES as well as the positioning of these companies in the various demands sectors and in the EES product value chain are illustrated in this chapter. The existing EES financing typologies and the most commonly adopted and promising EES market strategies adopted in Italy are also described.

Chapter 4 is dedicated to three EES products and business strategy good practice examples: i) the Action Plan for Energy Efficiency in Padova Municipality (Region of Veneto) - all activities carried out pertain to three different directions of intervention: the improvement of the municipality contract for the provision of electricity, the improvement of the quality of existing plants and the improvement of energy management techniques; ii) Energy Efficiency in Schools in Modena (Region of Emilia Romagna) – the project was born from the need to reduce operational and maintenance costs of school buildings and at the same time to raise awareness on the rational and sustainable use of resources; iii) Eni 30% campaign – based on a study of the average energy consumed by a standard 4-member Italian family in the areas of transportation and according to their domestic habits, the Eni 30% Campaign provides advice on the approach to be taken (precisely 24 recommendations) in order to decrease domestic expenditure on energy consumption by 30%.

Finally, chapter 5 illustrates the outcomes of the interview campaign performed among 15 representatives of ESCOs and energy companies operating in the Italian EES market. The interview campaign outcomes complemented the information provided by the 5 experts of the EES market and provided important insights for the analysis presented in the various chapters of the present document.


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2 Overview of the national EES market and its market players

In the early 1980’s, the first Energy Service Performance Contractors were selling heating services to the public sector by way of “chauffage” contracts called “Servizio Calore”, which are still used today in some areas of the public sector3. Since then, the national and European political agendas placed increasing emphasis on energy efficiency, leading in Italy to the introduction of new types of contracts, new players in the market for EES and new energy policy instruments supposed to foster EES market development.

In 2001 (24th of April), a ministerial decree on energy efficiency and energy savings in energy final uses introduced a white certificate mechanism whereby a number of gas and electricity distributors (identified based on their number of clients) were obliged to achieve a certain level of energy savings every year. The 2001 ministerial decree was later repealed and replaced by two ministerial decrees issued in July 2004 (one for electricity and one for gas)4, which confirmed the initial setting of obligatory energy savings targets for gas and electricity distributors to be achieved through the implementation of energy efficiency improvement measures by the actors eligible to participate in the mechanism, without prejudice to the proceedings and measures suggested by the Italian Authority for Electricity and Gas (AEEG). The white certificate mechanism is one of the main energy policy instruments presently in place to stimulate the Italian EES market through the implementation of energy efficiency measures at energy end-users by the obliged gas and electricity distributors and the other eligible actors (i.e. ESCOs, not obliged electricity and gas distributors, companies obliged to appoint an energy mangers according to the Italian law 10/91)5.

One of the experts interviewed for the purposes of this report provided a very clear description of the market for energy efficiency services in Italy, he said that the market has developed following a uneven pattern that he depicted as “patchy”. He explained that energy service providers have always privileged large projects as they are more profitable, thereby leaving out large potentials of energy savings existing in smaller realities such as small and medium companies, or private final users. To solve this issue, he is actively promoting the development of so called “mixed” ESCOs, or territorial public-private partnerships where the public party would be responsible for the aggregation of demand, i.e. of all (small, medium and large) subjects of a certain territory (most likely municipal or regional) interested in energy efficiency interventions, while the private party would have to provide energy efficiency services to all interested subjects, without excluding smaller and thus less economically significant (if considered alone) projects. In this manner potential energy savings are exploited and potential financial losses are avoided: energy saving becomes an instrument of aggregate finance.

This type of market evolution is strongly reflected in the results illustrated in this report. In particular we will see that because large projects were always favoured over smaller ones (though it is not the only reason), the sector where most interventions on energy

3 Please see paragraph 3.6 for a detailed description of the types of contracts used. 4http://www.ewc.polimi.it/dl.php?file=20040920DecretoGas.pdfj; http://www.ewc.polimi.it/dl.php?file=20040920DecretoElettrico.pdf 5 The guidelines for the preparation, implementation and assessment of energy efficiency projects are provided in the decisions 18th September 2003 no. 103/03 and 11th November 2004, no. 200/04. These decisions also include the requisites for Energy Service Companies accreditation as well as a description of the White Certificates market mechanism alongside the criteria and modalities for their issuance.


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efficiency have taken place is the public sector, starting from healthcare. The private sector market is presently much less developed, especially the residential part, precisely because of small project sizes. The market of energy efficiency services in industry is growing, though it is constrained by financial issues.

The uneven market development pattern is also reflected in the supply segmentation. The EES offer is divided between large multi utility companies, energy distributors, retail energy sale companies, consulting companies and others, whose core business is rarely that of EES per se, and small “pure” ESCOs (whose core business is EES): the former typically operate on large projects and the latter on small projects, mainly due to different financial capacities. In any case, as emphasized by the experts interviewed, the greatest market development potential lies in small and medium sized projects (small industry and private individuals).

Data concerning the national EES turnover in recent years are quite scarce. Moreover, these data do not usually include external costs and benefits (e.g. job creation) of energy efficiency measures; if those were included, the market size would probably double according to one of the interviewees.

Concerning the type of interventions implemented, the most common are efficient lighting, efficient heating and micro and cogeneration for efficient electricity production by final users.

The main energy policies affecting the Italian EES market are included in the National Energy Efficiency Action Plan (NEEAP) and will be illustrated in the report section dedicated to this topic.

2.1 Number and types of EES providers

It is very difficult to estimate the number of EES providers existing in Italy. The above mentioned ministerial decrees of July 2004, whereby the Italian white certificate scheme has been introduced, represent the first official reference providing the definition of the term “ESCO” in Italy. The AEEG annual evaluation reports monitoring the marked increase in the number of companies accredited as ESCO under this scheme as of 2004 are the only available information source providing indications in this respect. According to these decrees6 any company providing integrated services (i.e. technical planning, implementation, operation and maintenance) for the realisation and possible management of any intervention may be accredited as ESCO. This implies that very different company types may fall under the ESCO definition adopted in Italy and that statistics based on this definition do not necessarily refer to the EES providers that are the subject of this report.

That being stated, on the 1st of April 2009, based on data collected by AEEG7, 1.342 companies resulted registered as energy service companies, in accordance with the Decree of the President of the Republic n. 445, 28th Dec. 20008. The 2009 AEEG annual energy service status report9 also highlights an increase in the number of energy service companies of 19% compared to the previous year 2008. Such market growth was fostered not only through further liberalisation of the energy market, but also by the evolution of the White Certificates market mechanism for which company accreditation (as an energy service company) was introduced as a condition for

6 See in particular article 1, paragraph 1, letter t), of attachment A in the AEEG decision no. 103/2003 of the 18th of September 2003 7 Ortis., A., Fanelli.,T., Relazione annuale sullo stato dei servizi e sulle attività svolte (Ch.4), AEEG 2009 8 The Decree introduced a new system of voluntary self-certification in place of the previously required notoriety act. 9 Ortis., A., Fanelli.,T., Relazione annuale sullo stato dei servizi e sulle attività svolte (Ch.4), AEEG 2009


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submitting energy efficiency projects. Company accreditation is only meant to grant access to the online information system for the submission of energy efficiency projects and is acquired by way of a declaration by the company. Among the accredited companies, 221 of them (or 16.5% out of the total) have presented at least one energy efficiency project for the certification of energy savings, though only 183 of them have actually obtained the issuance of white certificates.

Based on data retrieved from annual AEEG reports evaluating the white certificates market mechanism10, the following developments occurred in the last three years.

Table 1 : ESCO statistics under the Italian TWC scheme

AEEG April 2009

2008 2007 2006

# companies accredited as energy service companies 1342 1169 919 577

# companies that submitted energy efficiency projects for certification of energy savings

221 185 134 na

# companies that obtained the issuance of a White Certificate for energy savings 183 140 106 na

Total # of white certificates issued 107680411 903 627 611 529 286 837

% of total white certificates obtained by ESCOs12 Na 76,6% 72,3% 64,6%

Source: AEEG Annual Reports on the White Certificates Mechanism

Though such a growing number of accredited ESCOs is very good news, we should be careful with optimism: if we compare the data above with that of the North American NAESCO13, we see that the latter only counts 67 members (including ESCOs, Energy Service Affiliates, Associate Energy Service Affiliates Members and Public Sector Members), among which only 18 (10 Energy Service Providers, 7 ESCOs, 1 Energy Efficiency Contractor) are actually accredited following very strict procedures. Since the US market for energy efficiency services is much more developed than the European one, we can deduce that a high number of ESCOs is not necessarily an index of a well developed EES market.

According to the 2008 AEEG Report, energy service companies were found more active in the North, where half of them are situated, compared to the centre (a third of them) and South of the country. By tradition, energy service companies in Italy are mainly operating in the public sector, though the commercial and industrial sectors are also gaining ground; there are however only very few public energy service companies

10 http://www.autorita.energia.it/pubblicazioni/altre_pubblicaz.htm: Rapporto annuale sul meccanismo dei titoli di efficienza energetica 11 Certificates issued until May 31, 2009 12 This is because ESCOs are not the only type of company allowed to participate in the White Certificate

mechanism. 13 NAESCO is the National Association of Energy Service Companies; http://www.naesco.org


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(Bertoldi et al. 2007). In fact, a survey carried out by the Italian Federation for the Rational use of Energy (FIRE) in November 200814 illustrates that, based on their sample15, 86% of the companies interviewed were private energy service companies while only 3% were public:

Figure 1 : Esco types existing in Italy (source: FIRE, 2008)

The FIRE Survey also exhibits a classification of energy service companies per type of activities they carry out: 74% of them identify themselves as ESCOs, 30% of them are consulting companies and 30% of them engineering companies. It stands out that different companies perform more than one of the above mentioned activities; among the ESCOs, 86% are also energy suppliers, 69% also offer engineering (design) services, 68% are also consulting companies and finally 60% of them are also active trading companies16.

An interviewee explained that in Italy large ESCOs were commonly created by fuel suppliers that have wanted to offer additional services to their standard package in view of new developments of the fuel markets (for instance the switch from gasoil to gas for heating purposes). The decision to create an ESCO was in fact more often based on financial feasibility rather than technological and technical capabilities: fuel suppliers had fuel deposits as financial assets and that was their biggest advantage in a market where financial resources were (and still are to a significant extent) scarce. For instance, considering the residential sector, a supplier of insulation materials and technology is more likely to constitute an ESCO in comparison with a building construction company as the latter is very dependent on bank loans to do business.

Finally, it is worth mentioning that in Italy a national network, grouping all local energy agencies, exists. It was created in 1999 following the European SAVE initiative, called

14 See “Indagine sulle ESCO in Italia” available at www.fire-italia.it 15 The initial universe of reference in November 2008 included the 151 EES providers that, in addition to being acreditated, were "actively” operating with the mechanism of white certificates, i.e. they had a securities account open with the GME (Gestore Mercato Elettrico). All companies were found eligible after verification via prior telephone communication. On the basis of questionnaires returned completed, the sample of responding companies amounted to 43 subjects, corresponding to about one third of the universe. 16 In the subsequent paragraphs, we will refer to “pure” ESCOs and “non pure” ESCOs. The former term indicates companies whose business is centred exclusively on energy efficiency services and whose income derives from activities related to energy efficiency; the latter instead are companies whose core business is not centred exclusively on the provision of energy efficiency services, and usually come from the energy service and facility management sectors (they include energy companies, facility management companies, consulting companies, engineering companies, and so on).

ESCO type

3%

86%

2% 7% 2%

Public Capital

Private Capital

Independent Company

Energy utility subsidiary

Mixed Capital


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ReNAEL. Such energy agencies represent EES providers often quite active in raising awareness about energy efficiency and energy efficiency opportunities.

2.2 Size of EES market

Bertoldi et al 200717 reveals that market size estimations are not only very rare but they also vary a lot depending on the samples selected and calculation methods used. Some experts approximated the market for energy services in 60 million EUR, based on the average annual turnover of energy service companies which are members of ASSOESCo18, an ESCO Association created in July 2005. However, the member companies of this association are generally only small and medium companies, so the actual market size is likely to be underestimated. Other experts have studied the micro-CHP market, where ESCOs are very active, assessing its market size to be around 300 to 500 million EUR. At the same time, others have estimated the micro-CHP same market size at only 160 million EUR (Bertoldi et al 2007).

A business information company, DATABANK, carried out an extensive market analysis in 2007, estimating the EES market size until 201019, based on indications from the largest market operators. Market size estimates (million of Euros) are reported in the table below.

Table 2: EES market size estimates in million Euros (source: Databank, 2009)

Data for the quantification of market potential in the years following 2010 are not available, whereas potential energy savings are illustrated in paragraph 3.5.

2.3 Existing incentives and barriers for EES

The main barriers recurring in the existing literature on the Italian EES market are illustrated in the graph below, adapted from a report on energy savings by CESI

17 Bertoldi, P., Boza-Kiss, B., Rezessy, S., “Latest Development of Energy Service Companies across Europe - A European ESCO Update –“, 2007, European Commission, DG JRC and Institute for Environment and Sustainability, Renewable Energies Unit 18 Associazione Nazionale Società Servizi Energetici – National association of energy service companies. 19 “Energy Service Companies”, COMPETITORS® Report (http://www.databank.it/prodotti/sommari/ZD9C.pdf)

2007 2008 2009 2010 2007-2010 (%change)

ESCO market (pure+non pure ESCO)

1.535 1.660 1.710 1.830 6

Pure ESCO market 180 275 387 522 46,6


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Ricerca20

As depicted in the graph above, barriers to EES market development can be grouped into three categories: barriers related to policy and regulation, barriers related to the EES supply side and barriers related to the demand side. Concerning regulation, the most significant barrier derives from the lack of implementation decrees to back up current regulation. For instance, the presidential decree 59/2009 is not only dated 2nd of April 2009 and was only published on the 10th of June, but also, it is the first implementing regulation issued (after 4 years), relative to the now very well-known legislative decree 192/05 concerning the implementation of the European Directive 2002/91/CE on energy efficiency in buildings. As outlined in another report of CESI Ricerca21, and underlined by one of the EES market experts interviewed in September 2009, current legislation on ESCOs is somewhat incomplete, not just in terms of providing a clear and unambiguous definition of ESCO, but rather for what concerns the enforcement of a number of legal and regulatory instruments such as the latest legislative decree 115/08 for the implementation of the ESD at the national level. Many regulatory measures cannot be enforced until the government emanates the relevant implementing decrees. Legislative processes in Italy are however very slow, not only due to political procedures and mechanisms, but also because the government is subject to strong lobbying pressure from different interested parties, especially for the efficient production of electricity as it leads to reduced energy consumption for energy producers and suppliers and to a more complex management of distribution networks for energy distributors. Conversely, monetary and fiscal incentives are being developed so fast that companies are resilient to invest in large energy projects due to uncertainty in relation with new legislative developments affecting tariffs and financial instruments for energy efficiency.

20 Capozza, A., Ciarniello, U.,,Groppi, F., De Nigris, M.; Studio sul risparmio energetico possibile con tecnologie efficienti: potenziale teorico e barriere che ostano al suo spiegamento, azioni per una migliore diffusione, CESI Ricerca, December 2006 21 Bernante, R., Capozza, A., Gallanti, M., Vanzan, R., Studi di supporto ad Enti Istituzionali nel campo dell’efficienza energetica. Attività svolte nel 2008, CESI Ricerca, February 2009.


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Moreover, the legislative system has not yet satisfactorily tackled the issue of energy efficiency project evaluation. There are no standards for accurate measurement of energy savings granting authenticity to performance guarantees in ESCO contracts.

Finally, energy efficiency has not been a priority on the political agenda because the concept of energy efficiency is not easily sold to the people – the concept of renewable energy sources for instance is much easier to explain. At the political level, what cannot be sold does not buy votes; therefore energy efficiency has always been lagging behind.

Looking at barriers for the supply side, the payback period is a critical factor. ESCOs, by contract, bear not only technical risks but also economic risks when they invest internal funds in a project. Thus, the longer the payback period, the greater the risk. Because of the current economic context, risks are also linked to the client’s economic and financial stability: the longer the payback period, the greater the risk of bankruptcy in an economic slowdown. This partly also explains in general why ESCOs have traditionally preferred working with the public sector, rather than the private sector.

On the supply side, access to capital is very difficult for small and medium ESCOs, which affects nearly the total market for pure ESCO services, and the situation was worsened by the current economic slowdown. This issue is further explained in paragraph 3.6.

According to the interviewees, lack of technological R&D for small projects (which represent the greatest potential market development) is also a strong issue: small projects need a type of technological research that is not very innovative nor brings great visibility. This leads the topic to remain in the backstage as it does not raise the interest of researchers, nor the funds required for research. Because of this, in some technological sectors we see a lack of strong foundations, such as for cogeneration where there is the problem of thermal energy storage due to the simultaneity of generation of heat and power.

By tradition, companies that do not operate in energy-intensive industries are not necessarily motivated to invest in energy efficiency improvement measures as their energy bill only mildly affects their production costs. By contrast however, interviewees pointed out that from the demand side, if tradition commonly restrains service outsourcing, companies whose core business is not energy-intensive might be more willing to “buy” energy efficiency services and thus not directly manage energy bills themselves.

Again, with regard to the demand side, the payback period is also an issue, as small and medium companies that represent the greatest market potential may be unwilling to invest in long projects due economic factors such as electricity price volatility and technological uncertainty. However, the most relevant barrier from this side lies in the low level of understanding, lack of information and scepticism in general and in a limited understanding of energy efficiency improvement opportunities, especially through energy performance contracting and third party financing in particular. The perception of risk is also very high among potential customers if they are required to provide a high initial capital investment to implement the project. Furthermore, consumers interested in energy services also have to face burdensome administrative procedures and high transaction costs for small project-sizes.

The concept of split incentives is also applicable in this market: for instance where rented real estate is concerned, a landlord has no incentive to improve the energy efficiency of a building as it would only benefit the tenant with lower energy bills.

These barriers exist to different degrees in different regions of Italy, as the ESCO activity level varies across the Italian territory. However, all together, these barriers lead the market for energy savings to fail and imperfect EE markets cannot provide the


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most desirable social outcome.

The opportunities stemming from the Italian context are the following ones:

• the liberalisation of the energy market: the opportunity for energy suppliers to compete in the market with combined energy supply solutions and energy services may become a propeller of energy efficiency, and hence of the EES market. However, this additional thrust will only materialise when the energy market will be fully competitive.

• the growing interest in distributed generation projects: electricity generation across the territory, usually connected to the public electricity network of electrical distribution and hitherto centrally planned, is emerging in the global scenario as a solution to increase efficiency and diversification of the energy system. The main barriers to overcome relate to the costs of investment and operation and integration with the electricity network – in this scenario the role of ESCOs may be decisive for their ability to evaluate all technical and economic aspects and to provide an integrated service;

• the possibilities offered by modern information technology: computerised information systems can facilitate various stages of a typical ESCO intervention from the preliminary analysis stage to control and real-time plant management and the subsequent evaluation of performance and economic aspects. Furthermore, in some cases they may be useful to overcome the inertia of customers who do not know the details of plant energy consumption, and do not have the appropriate tools to evaluate the energy structure of their company.

Security of energy supply may also foster the EES market. It is a very serious problem in Italy as the country imports more than 85% of the oil, gas and coal that it consumes, and such figures are expected to reach nearly 100% in 2025 (source: Ministry of Foreign Affairs22).

Another incentive to invest in energy efficiency is the magnitude of the existing energy saving potential that can be seen not only as potential economic saving deriving from lower energy bills for citizens, but also as an opportunity to create new jobs: an interviewee mentioned that according to recent US statistics, each million dollar invested in energy efficiency would create 23 new jobs. If such prospective were applicable also in Italy, such opportunities might surely determine more investments on energy efficiency. Finally, despite the above mentioned issues and problems in the energy efficiency policy sector, many of the energy efficiency policies in place in Italy surely represent an incentive to EES, as described in the next report section.

2.4 Policy mix and development of EES

In Italy direct policy instruments supporting energy service companies are decentralised and therefore mostly implemented at regional level. The national government mainly intervenes through the introduction of tax rebates and the institution of funds devoted to the fostering and development of innovation and entrepreneurship in energy efficiency. While some incentives are applicable to all energy efficiency improvement interventions (such as the White Certificate market mechanism), others are specific to some types of activities (e.g. the so-called “conto energia” for microgeneration of renewable electricity by a final user) or sectors of

22 http://www.esteri.it/MAE/IT/Politica_Estera/Temi_Globali/Energia/Situazi_Italiana


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intervention (e.g. residential, industrial). Also, some of the incentives are granted on the basis of calls for tenders and are therefore only temporary, subject to a deadline for application; this type of incentive is usually applied to interventions in the public sector. A number of policy instruments have already been implemented in Italy and are mentioned in the country’s NEEAP: measures for the promotion of energy efficiency included in the 2007 budget law, definition of energy efficiency standards in the construction sector, promotion of high-efficiency co-generation, the “Progetto Industria 2015” for energy efficiency, training and information campaigns on the potential and opportunities for energy efficiency improvement measures for all categories of end-users (in sectors like residential, tertiary, industry). The 2007 Budget Law, from paragraph 344 to 365, provides attractive incentives for energy savings such as tax deductions covering 20% to 55% of the costs borne by the implementer, depending on the sector of intervention and the type of measure applied23. The beneficiaries of such tax incentives are all tax payers, professionals and companies intervening in favour of energy efficiency in the residential, tertiary and industrial sectors24.

The Progetto Industria 2015 establishes strategic guidelines for the development and competitiveness of the Italian production system, integrating craft, manufacturing, advanced services and new technologies, and analyses the future economic and productive scenarios that our country will be facing in the medium and long term (2015); in practice it mainly consists in identifying productive technological areas as well as determining specific objectives for industrial innovation. As part of Progetto Industria 2015, the first so called Progetto di Innovazione Industriale or PII (industrial innovation project) is focused on the goal to boost the competitiveness of the industrial system by saving energy in production processes and in its outputs. Companies, research institutions, universities and private financial entities are invited to participate in PIIs on promising technological areas, with the financial and regulatory support of local and national administrations.

A significant role in the achievement of end-use energy efficiency improvement goals also play strong, effective and comprehensive training and information activities on the topics under consideration. To this end, the Ministry for Economic Development, in cooperation with the Ministry for the Environment and for the Protection of Land and Sea, has signed a number of agreements with specialised agencies such as ENEA25 and ReNAEL26 in order to launch integrated training programmes and information, communication and educational campaigns, targeting the public at large, including families, schools and universities. These measures should contribute to improving

23 Measures eligible for tax deduction include e.g. building thermal insulation, installation of solar thermal and photovoltaic panels and highly efficient boilers in the residential sector, VSD installation in the industry sector, etc. The maximum tax deduction amount admitted varies from 100,000 Euros (in case of existing building complete retrofitting in the residential sector) to 30,000 Euros (in case of energy efficient boiler installation in the residential sector). 24 For more detail refer to the official country NEEAP at

http://ec.europa.eu/energy/demand/legislation/doc/neeap/italy_en.pdf 25 Agenzia nazionale per le nuove tecnologie, l’energia e lo sviluppo economico sostenibile (or National agency for new technologies, energy and sustainable economic development) constituted based on article 37 of the law no. 99 of the 23th July 2009. 26 Rete Nazionale delle Agenzie Energetiche Locali (or National Network of Local Energy Agency) constituted following the European Initiative SAVE.


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market offers and stimulating greater demand for energy efficiency services, and thus slowly increasing the level of competition in the market.

However, according to one of the expert interviewed, prospected information efforts are still insufficient. Huge informational and training efforts aimed at final users are needed (in general each new European directive provides 3% to 5% of funds for information and training initiatives accompanying the directive’s implementation) as new laws generally lack implementing measures. “In Italy laws are born like Minerva”27 said our interviewee. This problem is not unrelated to pro-consumption information campaigns that final users face every day (in response to the financial and economic crisis, the government is indeed encouraging consumption). To counterbalance these campaigns, greater advertising means are to be exploited and focused on quality rather than quantity (both for pro-consumption and against-consumption purposes): “the public should not be told to consume less but to consume better”. Furthermore, for informational efforts to be effective, energy interventions in the public sector need to gain greater visibility to ensure credibility. However, in Italy, ‘saving up’ refers to spending less money, and not spending money in a better way (there is no such thing as in the UK where Italians would consider ‘getting value for their penny’). This line of thought is in contrast with the concept of lifecycle cost analysis applied in energy efficiency improvement measures.

Another interviewee suggested that in order to give energy efficiency service providers greater credibility, the government or AEEG should constitute an official register with more stringent and restrictive criteria with respect to the ones presently adopted for ESCO auto-certification, by distinguishing per type of energy efficiency provider, as it was done in the USA by NAESCO (for instance separating energy service providers from ESCOs operating via energy performance contracts). In this way, final users would feel more confident towards the whole energy efficiency mechanism.

As described in paragraph 2.3, an important barrier for small and medium pure ESCOs is access to capital. In order to alleviate financing difficulties and promote third party financing, the government has introduced a new 25-million revolving fund called “Fondo di rotazione per il finanziamento tramite terzi”28 to finance projects carried out by ESCOs through third party financing. Many experts29 suggest that such money should not go directly into the fund but should also serve as an insurance fund to function as a guarantee for the banking system allowing ESCOs to finance energy efficiency projects through third party financing30. Its establishment and effective operation could enable a considerable growth in energy efficiency investments, reducing national energy consumption levels and contributing to the economic rebound in the country.

However, according to one of the interviewees, revolving funds are one of the most effective tools to encourage energy efficiency investments as they allow banks to also

27 Romans attributed to Minerva (also known as Athena for ancient Greeks) a non-natural birth provoked by a terrible migraine of her father Zeus: Vulcano (Roman god of beneficial and hindering fire) opened Zeus’s head and drew Minerva out of it, already fully dressed of her armour and shield. 28 Money from this fund, introduced and described in art. 9 of the Ministerial Decree 115/08, have not yet been made available by the government. 29 See for example Ferrari, C., “Le ESCO ed il finanziamento tramite terzi quale strumento di sviluppo dell’economia” proceedings of the Rinenergy annual conference, 2008 available at http://www.rinenergy.it/ 30 If the revolving fund were used as an insurance fund, for example at a 1:10 ratio, 25 million Euros would become 250 million Euros.


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finance smaller projects with longer contract terms. Ideally, there should be more revolving funds and less incentives: incentives may deceive final users as these may feel content to have money at the beginning to find themselves insolvent in later periods.

Also, this would enhance competition in the EES market, levelling up small pure ESCOs and large non pure ESCOs. Access to financial resources would no longer prevent small pure ESCOs from working with large EE projects and would foster a competition based on skills, competences and experience rather than financial strength.

As already mentioned, a strong political tool for energy efficiency is represented by White Certificates. This market mechanism introduced by the July 20th, 2004 ministerial decree, serves first of all to certify the energy savings actually achieved, thereby allowing to verify the progress towards the achievement of the obligated energy saving targets. Within the 31st of May of every year since 2006, obligated electricity and gas distributors have to deliver a number of energy efficiency titles (white certificates) equivalent in volume to their own annual savings objective, to AEEG. The titles acquired by all actors eligible to participate in the system (i.e. ESCOs, electricity and gas distributors and companies obliged to appoint an energy manger by the Italian law 10/9131) can be marketed in the market regulated by GME (national electricity market manager) according to the rules prescribed by the AEEG, or through bilateral contracts.

As the energy tariffs applied by obliged actors are regulated, the AEEG defines annually a cost recovery rate for each toe saved by these actors. This cost recovery rate was 100€/toe saved until 2008. Starting from 2009 the recovery rate is calculated annually by the AEEG by multiplying the cost recovery rate granted the previous year by a correction factor that takes into account the average reduction (or increase) registered in electricity, gas and fuel for transport gross sale price applied to small energy end-users; the higher the average price reduction the lower the cost recovery rate granted32. Money granted to obliged actors are taken by a national fund fed by energy bills paid by all electricity and gas consumers.

An important feature of this mechanism is that the projects allowed for the obtainment of white certificates are not just unique projects for which the project implementers have to propose an ex-post energy saving monitoring and evaluation method to be approved by the AEEG, but also the set of standardised projects for which the AEEG developed standardised methods to monitor and evaluate the energy savings generated. Furthermore, there is a maximum number of years per project during which annual savings can be certified and thus white certificates issued. This timing constraint is usually 5 years though it reaches 8 years for some specific projects in the residential sector, concerning the building envelope.

The obligation scheme implemented under the Italian tradable white certificate system may potentially foster the EES market mainly for the following reasons:

• the obliged actor’s energy saving target directly stimulates energy efficiency project implementation at the energy end-users by the actors eligible to participate in the system;

• the energy savings are certified by an independent body (i.e. the AEEG) and

31 According to the law 10/91 all public entities consuming annually more than 1,000 toe and industry and tertiary private companies consuming annually more than 10,000 toe must appoint a responsible for energy management. 32 The cost recovery rate calculation formula is reported in the AEEG decision EEN 1/09.


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this fact should better guarantee that the savings claimed by project implementers are actually achieved;

• the standardised energy saving monitoring and evaluation methods adopted under the scheme allow to reduce transaction costs due to monitoring and evaluation and the bundling of small size projects,

• the certificate trading and the definition of sound certificate property rights should increase the cost-effectiveness of the energy efficiency measures implemented;

• the economic incentive represented by the certificate market price and the cost recovery rate granted to obliged actors should foster eligible and obliged actor initiative.

When compared with other white certificate schemes existing in Europe, the Italian TWC scheme seems to be the only one explicitly designed to support ESCO business because it allows ESCOs getting white certificate for energy efficiency projects implemented and benefiting from the additional income deriving from certificate sales.

At four years from its implementation it is however difficult to establish to what extent the ESCO business has been actually stimulated by the white certificate scheme in place in Italy. Looking at the number of companies auto-certified as ESCOs under this scheme and the number of white certificates issued for energy efficiency projects implemented by these companies (see report chapter 3 and related subsections) it would seem that the Italian TWC scheme actually played an important role in stimulating ESCO activity. Nevertheless, the scheme effectiveness in stimulating this activity should be assessed against the additionality of the energy efficiency projects implemented under the scheme. In other words, the main question to be answered is: would ESCO energy efficiency projects have been realised anyhow also without the incentive represented by the white certificate scheme? A not definitive answer to this question may be formulated by observing that the saving measures so far responsible for most of the savings realised under the TWC scheme are the cheapest and easiest ones to implement (e.g. installation of CFLs, low flow showerheads, faucet aerators, solar panels for domestic hot water, class A domestic appliances). As also confirmed by the experience matured in other European countries, white certificates seem indeed to be able, at least during the first years of their implementation, to stimulate the wide implementation of the measures with the lowest investment costs, whereas the biggest energy saving potential available in sectors like industry typically remain untapped. In Italy this may be better understood by observing that the obliged actor cost recovery rate of 100 €/toe saved has been the main determinant of the price of the white certificates sold on the organised market which has always been below 100€/toe. This roughly indicates that the economic incentive represented by white certificates correspond to a very small part of the investment costs needed for measures that are more complex, that have higher saving potentials than the above mentioned cheap ones and that have investment returns that might be interesting for the ESCO business. Therefore, white certificates have so far provided incentives and have hence proved to be additional with respect to energy efficiency measures that would hardly represent ESCO business. Things however may, and actually should, change in the near future because the saving targets to be achieved by obliged actors in the next years will likely be markedly higher, the so-called low hanging fruits (i.e. the cheapest and easiest energy saving measures to implement) will be soon exploited and the reference baseline for the calculation of the energy savings attributed to these measures will have to be changed by the AEEG because the related energy saving potential will be exhausted. When this will happen the available measures to comply with the obligation will probably be characterised by higher investment costs and higher returns of investment for the ESCOs that will possibly decide to participate in


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the white certificate scheme.

So far Italian white certificates have hence usually represented an additional cash flow for ESCOs but they have seldom represented the main driver for the implementation of the energy efficient projects certified (probably with the exception of the provision of the above mentioned cheap measures implemented in the past four years).

Another useful policy instrument for the efficient production of energy by final users is the called “Conto Energia”33. It is a feed-in tariff whereby national energy utilities are obliged to purchase renewable electricity from final users producing it at market rates set by the government34. The higher renewable electricity prices help overcoming the high costs of renewable energy production. However, this type of system is likely to be phased out after some years as it will not be economically sustainable to maintain it for too long. In fact, since two years, the tariffs applied in Italy on photovoltaic energy are reduced by 2% every year.

Given all of the above, the following are the main challenges for the future:

• Commercial area: being able to explain to the market the advantages of energy efficiency services (in Italy there always is the temptation to do things alone rather than pay others to do it), it is essential to emphasize that if companies concentrate their energies and resources on their core-business, then energy efficiency services can only be beneficial;

• Financial area: especially in times of crisis, capital is scarce for everybody, and it is therefore necessary to organise effective financial services suited to large energy efficiency investments from companies and consumers;

• Legislative area: current legislation is still underdeveloped to support large investments in energy efficiency.

Finally, it might be worth mentioning that financial incentives and subsidies might be a good policy instrument to stimulate the EES market during its early stages. Nevertheless, such a market should not rely on government financing for ever and energy policy instruments aiming at regulating and creating the framework conditions for the development of such a market should be preferred for the definition of a long term strategy in this sector by policy makers. In this respect the building sector may in principle disclose important investment opportunities if suitable energy policies (e.g. building energy performance certification) are implemented or improved to increase energy end-user awareness about existing economic saving potentials.

2.5 (Potential) competitors and (potential) partne rs in the EES market

In its 2007 market analysis, DATABANK35 presents data on market concentration for both non-pure ESCOs and pure ESCOs. In the first case, the largest four firms

33 This policy instrument addresses renewable energy generation. As such it should not be strictly considered as an energy efficiency improvement measure. Nevertheless this policy instrument and possible energy services addressing renewable energy generation are considered in the present analysis of the Italian EES market insofar as they comply with the ESD Annex III which includes “domestic generation of renewable energy sources, whereby the amount of purchased energy is reduced (e.g. solar thermal applications, domestic hot water, solar-assisted space heating and cooling)” among the eligible energy efficiency improvement measures. 34 The feed in system is applied to power plants below 1 MW generating electricity from hydro, solar, biomass, wind, geothermal, tidal, dump gas 35 “Energy Service Companies”, COMPETITORS® Report

(http://www.databank.it/prodotti/sommari/ZD9C.pdf)


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operating in the market control overall approximately 70% of the non-pure ESCO market, while in the latter case, the four major companies altogether control just under 40% of the pure ESCO market. From this data it stands out that there is large untapped potential in the pure ESCO sector as the number of operators is still very small compared to potential market developments (see paragraph 3.2 for more details on this topic). The non-pure ESCO market is more concentrated, with large companies, that are more likely to operate in the public service area, where projects are also large, rather than in the private sector (see paragraph 3.3 for more details on this topic).

• In the non-pure ESCO market, the three largest companies (SIRAM - 27.1% market share, ELYO ITALIA - 23.1% market share, and COFATHEC SERVIZI

• 14.1% market share), concentrate their energy efficiency services in the public sector, and particularly in the healthcare sector mostly providing efficient heating services. The fourth largest market operator, CARBOTERMO (3.5% market share), is instead more active in the industrial and residential sectors.

• In contrast, in the pure ESCO market, the situation is the other way round: the three largest companies (CAROLI GIOVANNI ENERGY SERVICE COMPANY – 17% market share, BERICA IMPIANTI (Gruppo economic) – 8.8% market share, and PIANETA – 6.4%) mostly operate in the private sector, and especially in the residential one, while the fourth largest company of the market, CONSORZIO ABN A&B NETWORK SOCIALE (2.5% market share) is rather focused on the public sector, working with local and regional administrations.

From the situations pictured above we deduce that the market for EES is divided between large non-pure ESCOs in the public sector and smaller pure ESCOs in the private sector; these two groups hardly compete with each other. Instead, there exists some level of competition within the two groups.

The 2009 CESI Report36 looks at the relation between ESCOs and utility companies. The progressive liberalisation of the energy sector in Italy has forced energy utility companies to diversify their service offer to strengthen their competitiveness on the market of final energy uses: citizens nowadays tend to prefer more elaborate services compared to the simple sale of affordable energy. There are therefore two alternatives for energy utility companies in relating with ESCOs: creating a subsidiary specialised in energy efficiency services and thus competing with ESCOs, or creating partnerships with ESCOs already operating in the market. The report states that currently, it seems realistic to say that large international multi utility companies have generally opted for the first alternative while the second was more often followed by local utility companies.

In relation to this issue, one interviewee commented that in general there exists a strong antagonism between utility companies and ESCOs because ESCOs are not only seen as potential competitors but also as guilty of depleting the utility company service offer in terms of energy services. Where utility companies do not compete with ESCOs, they act against them via other routes such as political lobbying in legislative decision making processes. We also illustrate the creation of networks as a possible market strategy in paragraph 3.7.

36 Bernante, R., Capozza, A., Gallanti, M., Vanzan, R., Studi di supporto ad Enti Istituzionali nel campo dell’efficienza energetica. Attività svolte nel 2008, CESI Ricerca, February 2009.


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3 Analysis of market segments and opportunities for Energy Companies and ESCOs

3.1 Existing EES market offer sector by sector

The market for energy services in Italy initially started over 20 years ago (Bertoldi et al. 2007). The market for such services was mostly driven by public demand and implemented by very few traditional energy market operators that have later been accredited as “ESCO” by the Italian Energy Authority (AEEG). According to a 2009 report of the research institute CESI Ricerca, the pure ESCO market is instead very recent and developed along with the progressive liberalisation of the energy and electricity markets in the country. In their initial phase of development, ESCOs created by large utility companies were advantaged due to their financial strength, and concentrated on large projects in the public sector. As time passed, the increasingly effective legislative regulation of the sector on the rational use of energy has allowed the entrance of independent professionals and small and medium specialised companies for the provision of EES (Bertoldi et al. 2007).

The figures shown in the table below indicate the degree of EES market development by sector (1=very low, 5=very high) as indicated by two of the interviewees.

Table 3: Degree of EES market development in different market sectors

Market Sectors

Primary and secondary schools 1

Universities 1-2

Local administrations (municipalities, provinces, regions)

1-2

Health/Hospitals 5

Institutional Sector

Public housing 0

Hotels/hospitality 3

Office, commercial 1

Retail 1

Industry 3

Private sector

Residential 2

The following comments were provided by the interviewees to explain their grading in the table above. Primary and secondary schools in Italy belong to municipalities and provinces so there is no relation between who manages them and who finances them. There is therefore a problem that can be associated to that of split incentives whereby


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school managers do not receive energy bills and therefore are not keen to reduce energy consumption as their first priority. Also, schools have a small load factor since they close every afternoon, every Sunday and for three months every summer. This is not the case for universities that in fact request more energy efficiency interventions compared to the former; since they do not belong to municipal and local governments, universities are more aware of their energy consumption and expenses. Public housing is in the same context as that described for schools and furthermore, there are other priority problems to be tackled in this area such as squatters (in this sense there is also the problem of centralised heating: as long as one tenant pays the bill, heating cannot be interrupted). Instead the most common problem with local administrations is that they often lack the technical skills and competences to draft appropriate calls for energy efficiency interventions.

In the private sector, problems in the commercial, office and retail sectors have arisen from fashion trends: for instance glass became very fashionable and hence many offices used it for their walls, thus causing an overload of energy in summer (in fact it often happens that more money is spent on air conditioning than heating in such cases). Also, if we consider shops and lighting, we will notice that most shops privilege warm lighting (generally more energy consuming) because it helps sales.

Industry has invested a lot in processes, but it should be subdivided in different industrial areas: in the paper industry, cogeneration is very widespread; in the food industry there is still a lot of room for improvement; the chemical sector has become quite small; the engineering industry has not accomplished much in terms of energy efficiency as it counts many small and medium companies and the textile industry shows a very inhomogeneous development of energy efficiency services. The general problem in industry is that it is very vertically fragmented and it is therefore very problematic to implement integrated management strategies. For instance if such skills were available, waste could be recycled more easily inside the country without companies having to purchase scrap materials for production from abroad37.

Energy efficiency services in healthcare mainly consist of heating services and were therefore primarily offered by non-pure ESCOs: co-generation plants were usually installed in hospitals by way of chauffage-type contracts (Servizio Energia)38 and rarely by third party financing. The introduction of this type of services was facilitated by the fact that the public administration decided that it was more economically efficient to outsource them due to their high energy savings potential (Bertoldi et al. 2007). For the same reasons, another type of intervention very commonly applied and particularly in the public sector is energy efficient lighting, which has recently also been gaining growing appreciation in the industrial sector. Such lighting services are strongly promoted by the government (through new regulation for light pollution and the lighting sector in general) especially because they provide significant energy savings with relatively low capital investment (CESI Ricerca 2009).

An objective description of the current state of the EES market relies on acknowledging that the Italian industry mainly consists of small and medium-sized companies. This implies that most of the projects outside the public sector are small and partly explains why the market is less developed in the private sector. As large utility companies were the first to deal with energy efficiency services, (as complementary services for their core business), they favoured large projects in the public sector leading to greater profitability, over smaller projects in the private sector. The following table reports approximate quantitative estimates provided by one

37 Take the example of a furniture company: scrap wood could be reused in production if the company had the technology and skills to recycle it directly, but in most cases the market is too fragmented to create this kind of situation. 38 Please see paragraph 3.6 for the analysis and description of contracts in energy efficiency.


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interviewee concerning the number of market operators per type of services.

Table 4: Number of EES providers for various energy service types

Type of services Number of operators

Heating services 5 or 6 large international operators and 50 -100 local operators

Efficiency of electricity production in final uses Less than 10 pure ESCOs

Efficiency in lighting services A few dozen of pure ESCOs

Efficiency of electrical drives A few dozen of pure ESCOs

Final uses of heating services Hundreds of operators of which very few in the heat recovery systems

According to the 2009 CESI Ricerca report, cooperation with the public administration has proven to be very advantageous for ESCOs for three main reasons: the public administration is largely energy inefficient, there are nowadays stronger energy efficiency requirements and policies (especially when considering the EU goals) to which the public sector tends to be more sensitive than the private one, and there is a general lack of capital funds for investment in energy efficient solutions. In this case, an ESCO represents a good response to the public administration’s needs without burdening consumers with further taxes: the pursuit of energy efficiency results in a reduction in the medium and long term of a tax levy (as much hidden as it is useless or wrong) represented by the share of public budget used to cover the external costs arising from energy management, whose degree of inefficiency is directly related to the extent of external costs.

The only obstacle in the public sector is that public procurement rules do not suit well the concept of energy performance contracting: decisions on tender procurements are commonly based on the initial investment cost as opposed to project performance and project life-cycle costs and benefit analysis (Bertoldi et al. 2007).

Always according to the 2009 CESI Ricerca report, further aspects to consider in this context are the fact that the use of an ESCO involves a significant decrease of responsibility for the public administration compared to a situation where public entities would directly manage an energy efficiency improvement measure, and that there is a high degree of appreciation for such type of intervention by the citizens.

Regarding instead the private sector, the commercial and industry markets have gained greater importance in recent years, as well as the residential sector – to a lesser extent – where heating services are applied to new dwellings and some co-generation plants are set up by ESCOs (Bertoldi et al. 2007). The Italian Federation for the Rational Use of Energy (FIRE) carried out a survey in 200839 for which it interviewed a sample of 43 EES providers in Italy; among them, the companies that identified themselves as ESCOs represented 70% of the sample and were active in the following sectors:

• industry: 59.4%

39 See Relazione Sintetica, Indagine sulle ESCO in Italia, Federazione Italiana per l’Uso Razionale dell’Energia (FIRE), 2008


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• tertiary: 50%

• residential: 37.5%

• public sector: 53.1%

The last figure shows that the ESCOs interviewed are more active in the private sector than in the public sector though the latter market is larger. This confirms the thesis provided by one interviewee explaining that pure ESCOs commonly work with small and medium companies on projects alike, while non-pure ESCOs (most likely subsidiaries of large utility companies endowed with greater financial resources – according to the FIRE survey in fact, 85.7% of energy producers also operate in the ESCO market) are more active in the public sector where large-scale projects make up for the larger size of the market.

In general, as also pointed out by one of the interviewees, energy consumption costs are much more important in the private than in the public sector. This is why public administrations recur to ESCOs basically because they do not want to get bothered with energy management, whereas private companies employ ESCOs because they are more sensible to energy efficiency benefits40.

3.2 Analysis of potential needs for EES in the diff erent demand sectors

According to a number of interviewees, nearly all market development potential lies in the private sector. Except for industry where some of the potential is already under exploitation, all other sectors are practically virgin; in addition to the ones mentioned in the tables above, sport centres (with and without swimming pools) were mentioned as having great potential for ESCO energy services as well.

The large potential lies in the services offered to SMEs that by definition require small and medium-sized projects. In this section of the market, competition is close to non-existent as the number of ESCOs is very limited compared to market demand and utility companies are hardly participating in it. Commonly, large companies only offer ready-made services prepared for large projects which are not easily adaptable to smaller project sizes. This highlights the strategic and competitive importance of EES customization, however technological research and innovations in this area are underdeveloped. A disincentive to customise services consists partly in the standardized projects publicised by AEEG in order to facilitate the acquisition of white certificates.

A possible solution to this problem, in some cases, could be project pooling; this strategy for instance could be especially successful in the residential sector if citizens created district community groups and pooled together a number of buildings to implement energy efficiency improvement measures.

An interviewee highlighted that a problem in energy efficiency services in Italy is that the country has invested a lot on demand but not on the supply side; there have not been any investments in R&D or industry/company incentives to foster energy efficiency “production”. This has brought the supply side to be underdeveloped with respect to other European countries. For instance, Italy is doing well exploiting renewable energy sources but it does not produce renewable energy technologies for such exploitation (as opposed to Denmark with wind power technology or Germany with photovoltaic technology). In this way all large energy efficiency investments are entrusted to large foreign companies and therefore all money invested in demand goes 40 An interesting example in this respect is provided by Malpensa and Linate airports where the whole lighting system is being refurbished through energy efficient measures implemented by ESCOs.


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abroad, so there are no in-country economic returns from such investments. Also demand incentives are likely to distort the market: for instance, in the photovoltaic context, a piece of land gains more value if used for the implementation of photovoltaic panels rather than if exploited for agricultural purposes; this leads land owners to rent their best (in terms of position) lands for the development of the photovoltaic sector, leaving their worst lands for agriculture.

Here follows an example in the photovoltaic sector provided by an article online41 dated 29th of July 2009: according to ENEA, much of the domestic photovoltaic industry is concentrated on assembling activities and in this market there are also some subsidiaries of large international groups. Only 1.5% of national businesses concentrates in the market segment of wafer production and silicon processing while this activity covers 52% of the sales volume and is strongly based on imported products. The article also says that in general the Italian photovoltaic industry shows a high degree of technological dependency, importing about 70% of the components needed for generation plants. Yet development opportunities are certainly not lacking: if domestic production in the sector managed to cover at least 70% of the domestic market share within 2020, it could create 175.000 new jobs, realizing 70 million Euro worth of turnover between 2008 and 2020. In the article ENEA concludes that such results could only be achievable if national policies were able to appropriately direct and stimulate the market.

Another interviewee pointed out that Italy is traditionally a low-energy-consumption country because energy prices have always been very high since nearly all energy is imported from abroad and there is a general lack of infrastructure. Furthermore Italy is first of all a manufacturing country that imports a lot of scrap material such as wood, glass and steel to be used as industry raw materials; it is therefore a country that recycles a lot. In spite of this there are however large potential savings obtainable from energy efficiency improvement measures and particularly in industry. In the civil sector forecasted potential is lower from the demand viewpoint as it happens that priority interests enter into conflict. For instance if we consider parks public parking lots, not lighting them up during night time would save energy but also reduce safety.

Looking at more specific technological areas and demand segments, an interviewee told us that interventions on the building envelope are too costly unless associated with other measures such as wall painting; cogeneration is likely to be very demanded (because economically viable) where there is a significant load factor, such as in airports, train stations, hospitals that open 24/7 (in these situations it is also often implemented via third party financing); efficient lighting interventions are also expected to rise in demand as they are very convenient in terms of energy bill savings (due to the taxes applied). On the last point, the interviewee also underlined that energy efficiency services are more demanded in the tertiary and civil sectors rather than in the industrial sector because energy bills are relatively higher in the former compared to the latter: as most energy is imported from abroad, there is a very high taxation and taxes levied on industry are obviously much lower (due to competition purposes) than those applied to the tertiary and civil sectors. Finally, microgeneration plants for renewable sources is still very costly for final users.

3.3 Positioning of energy companies and ESCOs in th e different demand sectors

By reading the figures in table 4, we notice that pure ESCOs tend to prefer operating in the sectors of efficient electricity production, lighting services and efficiency of electrical drives. From this we can deduce that pure ESCOs are likely to be more 41 http://energia24club.it/articoli/0,1254,51_ART_101062,00.html?lw=51


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active in the private sector (in particular the industrial and commercial sectors) while non pure ESCOs favour the public sector for the provision of EES. This derives from the fact that large companies (commonly non pure ESCOs) hold greater chances of winning tender procurements from local and national governments, while they face difficulties in customizing and rendering profitable the implementation of small and medium projects of energy efficiency. Hence pure ESCOs, typically smaller independent companies, are more oriented towards the private sector, where SMEs represent a huge untapped market potential in some areas and allow more space for specialisation and market differentiation.

This pattern of company positioning was also confirmed by one interviewee who pointed out that large companies commonly respond to public demand (especially concerning heating services) and that at the moment there only exists one large pure ESCO operating in the market for efficiency in the production of electricity, Fenice. Furthermore, we find confirmation of this picture in the market structure (level of concentration) described in paragraph 2.5.

This situation underlines the need for small independent ESCOs to specialise their market offer and invest in research and development so as to differentiate from large non pure ESCOs and thus gain stronger competitive advantage in some private market sectors. As mentioned above in fact, potential for market development related to small energy efficiency projects in the private sector is very high.

In Italy a number of associations and networks exists that support ESCOs, some are specialised for certain types of energy services and were created before pure ESCOs were born, while others, more recent, represent the pure ESCO market. AGESI (born as ASSOCALOR in 1984), Associazione Imprese di Facility Management ed Energia, covers nearly 90% (approx. 30 companies) of the ESCO offerings in the public sector including pure and non-pure ESCOs mostly specialised in efficient heating services (which were the first type to be introduced in the Italian market) (Bertoldi et al. 2007). ASSOESCO, the Italian ESCO association and Federesco, the national ESCO Federation are two younger associations that focus on providing and disseminating information on ESCOs and energy efficiency, represent ESCOs in front of the Public Administration (political activities), report on best practices in the EES market and promote information exchange and research and development for new efficient technologies. Federesco also offers legal, technical, tax and strategic consulting services to ESCOs.

3.4 Positioning of energy companies and ESCOs in th e value chain of EES products

The EES value chain is composed of the following elements: awareness raising, information and energy advice, identification of measures, technical planning, financing and subsidies, implementation (operation and supervision), optimisation of technical operation, measurement and verification.

It is important to analyse companies’ positioning in the value chain also because the ability to provide an integrated service, covering all stages of the value chain, is a significant success factor in the EES market. Integrated services are righteously presented as such in the CERVED42 market analysis alongside other characteristics including the capacity to work in different sectors of the market and the possibility to offer financing for the implementation of new energy efficiency projects. Issues related to financial resources will be dealt with in subsequent paragraphs. 42 CERVED is a company specialised in providing solutions to assess enterprise solvency


29

In the value chain, CERVED highlights energy audits as being the most important success factor as it is the foundation for project design and savings forecast (on which for instance, ESCOs’ profit margin is commonly based). Awareness raising activities are more often carried out by ESCO associations and networks described above, though ESCOs increasingly advertise their services in specialised magazines and websites.

Concerning the other stages of the EES value chain, the FIRE survey43 results provide interesting figures reported in the table below where the percentage of surveyed ESCO for each of the activities defined in the FIRE survey and for the corresponding value chain stage as defined in the ChangeBest project is reported.

Table 5: Percentage of surveyed EES providers positioning themselves in the various EES value chain stages according to FIRE and ChangeBest classification

EES provider activity according to the FIRE survey classification

EES Value chain stage according to ChangeBest

a. Energy audits Identification of measures 74%

b. Plant and equipment supply and installation Implementation (operation) 63%

c. Project design and definition of technical characteristics

Technical planning 60%

d. Management and maintenance Implementation (supervision) 51%

e. Results verification and measurements Measurement and verification 40%

f. Executive design and verification of security rules

Information and energy advice 33%

g. Supply of electrical energy and fuels* Implementation (operation) 33%

*The supply of electrical energy and fuels does not necessarily include the provision of EES.

74% of the companies surveyed consider themselves ESCOs and 81% of them said to carry out energy audits as a starting point for energy efficiency improvement measures.

Therefore, it is not surprising that according to these figures, energy audits result the activity mostly performed on a regular basis by EES market operators (74%); however, based on the fact that all other stages of the value chain average around 50% of positive response, we could deduce that fully integrated services are not always provided. In this regard, the survey exhibits other data: 84,4% of the companies surveyed among those that identify themselves as ESCOs do not offer an integrated energy efficiency service, failing, among others, to complement their EES with measurement, verification and maintenance. This implies that the market of ESCOs providing fully integrated services is even smaller than the EES market described in the previous paragraphs.

In this respect, one of the interviewees emphasized that the value chain “centre of gravity” is the actual implementation (operation) and technical installation of new plants

43 Relazione Sintetica, Indagine sulle ESCO in Italia, Federazione Italiana per l’Uso Razionale dell’Energia

(FIRE), 2008


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and equipments while other stages receive less consideration. This interviewee also pointed out that the attempt by utility companies to create a new subsidiary for the exclusive provision of energy efficiency services has often failed because these companies generally underestimated the difficulties and issues in the energy efficiency market and the same is true for the attempt to create partnerships with operating ESCOs as utility companies often fear to grant ESCOs too much power.

Therefore, as opposed to pure ESCOs, EES providers whose core business is different than EES or who are also active in other markets are less likely to offer integrated services. This is due to a lack of specialised skills and competences in the field. In fact, they are likely to apply the same technical skills to EES that they use for other types of services. For instance, an energy utility company may be more successful with the monitoring of savings than with the management of new facilities, while a facility management company would have more experience in managing new facilities and an engineering company would be better at creating customized energy efficient solutions.

This context supports the hypothesis that competition in the EES market is segmented depending on the types of companies offering EES.

3.5 Main EES types provided, fields of application and technologies

The 2008 FIRE Survey report presents a graph illustrating in percentages EES providers surveyed providing EES in different fields of application. The followings are the corresponding results.

• refrigeration: 7%

• building envelope insulation 16%

• air conditioning: 26%

• district heating: 35%

• Servizio Energia44 (heating and electricity): 37%

• public lighting: 37%

• measures to improve industrial efficiency: 40%

• efficient electricity production for final users: 56%

• renewable sources: 72%

One of the interviewees also listed the most common technologies for different sectors of intervention. In heating services, condensing boilers are most commonly used to replace old ones; cogeneration is often considered for efficient electricity production; new types of lamps and electronic devices to regulate light intensity45 are installed and thus improve the efficiency of lighting systems; inverters are used for efficiency in electric drives as well as the diffusion of advanced appliances to reduce reactive energy; new and innovative insulation methods for the residential sector are applied to render heating services more efficient and electronic appliances to regulate coolers are commonly adopted in heat recovery systems.

44 See paragraph 3.7 for definition. 45 For e.g. high efficiency fluorescent lamps with automatic control on the basis of the natural light.


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Figure 2 below provides indications about the Italian energy consumption segmentation whereas table 6 reports the existing energy efficient technologies with relevant economic energy saving potentials and their related field of applications.

Figure 2 : energy consumption segmentation – Italy 2005 (source: CESI Ricerca)

Energy consumption segmentation - Italy 2005 (primary energy)

25%

18%

6%22%

8%

18%3%

Transportation

Electrical drives (motors)

Lighting (including publiclighting)

Air conditioning and heating(including DHW) in the civilsector

Other electrical and heatinguses in the civil sector

Heating and conditioning inindustry and agriculture

Other electrical uses in industryand agriculture

Table 6: Promising energy efficient technologies and related application fields (Source: CESI RICERCA)

EFFICIENT TECHNOLOGIES

Ele

ctric

al m

otor

s/in

vert

ers

mea

sure

s in

the

cons

truc

tion

sect

or

App

lianc

es, r

esid

entia

l air

cond

ition

ing

Air

cond

ition

ing

Co-

gene

ratio

n an

d tr

i-ge

nera

tion

Ligh

ting

Re-

phas

ing

Hom

e an

d bu

ildin

g au

tom

atio

n

Aut

omat

ion

of c

ontin

uous

pr

oces

ses

ICT

Pro

puls

ion

syst

ems

Transportation x x

Electrical drives (motors) x

Lighting (including public lighting) x x x

Air conditioning and heating (including DHW) in the civil sector

x x x x x x

Heating and conditioning in industry and agriculture x x x x x

Other electrical and heating uses in the civil sector x x

FIE

LDS

OF

AP

PLI

CA

TIO

N

Other electrical uses in industry and agriculture x x x x


32

In the next paragraph we will describe the expected potential gains in energy savings achievable through the technologies listed above thanks to the existing energy policy measures, as indicated in a report by CESI RICERCA (Bernante, Capozza, Gallanti, Vanzan 2008) for the AEEG. The time horizon of their analysis is 2016-2020 and by following a “bottom up” methodology, summing up the expected energy savings from single energy efficient technologies assumed to be installed as estimated with respect to a reference baseline46.

For what concerns motors and drives, the interventions considered are mainly two: i) replacement of old inefficient motors with new more efficient ones – very short payback period (less than 2 years normally) and ii) installation of variable speed drives on motors. These types of interventions are generally carried out in industry and will provide annual electrical energy savings ranging from 9,7 to 18 TWh between 2016 and 2020, equivalent to 7% to 13% of energy consumed by electrical motors in 2005. Lighting in general constitutes 16% of electricity consumption across industry, residential and tertiary sectors. Interventions to improve lighting efficiency are estimated to provide annual energy savings ranging from 12,5 to 17 TWh between 2016 and 2020, or 25% to 35% of energy consumed by lighting in 2005. Air conditioning, heating and hot water in the civil sector, which cover about 60% of primary energy consumed in the civil sector, can be improved through interventions such as building envelope insulation, upgrading of the conditioning system including generation, distribution and control systems, or installing condensing boilers. These types of energy efficiency interventions will provide energy savings of 5,6 to 8 Mtoe, or 15% to 20% of 2005 primary energy consumption for heating and conditioning in the civil sector. Looking at energy consumption from industrial and agricultural thermal uses, the type of interventions commonly applied include cogeneration plants and devices for the monitoring and control of industrial processes so as to optimize the use of electricity. In these sectors, energy savings from 2016 to 2020 will reach 0,8 and 4 Mtoe i.e. from 2.5% to 12.5% of the primary energy consumed today for thermal uses in industry and agriculture.

In the table below, we show the range of the expected annual energy savings in the period 2016-2020 as calculated by CESI RICERCA and measured in primary energy units with respect to the reference baseline.

46 The baseline incorporates "spontaneous" improvements in efficiency, i.e. improvements that would occur even without implementing any type of energy efficiency policy due to the fact that products that come to the end of their life would be replaced anyhow by more modern and thus efficient products. In determining the potential savings, interventions that presented economically viable payback times were prioritised (costs of technology purchase, maintenance and operation were also taken into account in this estimate).


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Table 7: Range of expected annual energy savings in the period 2016-2020 by the energy policies mentioned in the NEEAP

potential savings (Mtoe)

Primary energy consumption in 2005

(Mtoe) min max

A. Transportation 36,5 2,0 6,4

B. Electrical drives (motors) 26,3 1,9 3,4

C. Lighting (including public lighting) 8,8 2,4 3,2

D. Heating and air conditioning in the civil sector 32,1 5,6 8,0

E. Other electrical and heating uses in the civil sector 11,7 1,4 4,2

F. Heating and conditioning in industry and agriculture 26,3 0,8 4,0

G. Other electrical uses in industry and agriculture 4,4 0,2 0,7

TOTAL (Mtoe) 14,3 30,0

For the conversion of electricity consumption into primary energy CESI RICERCA assumed a 45% conversion factor.

The total annual energy savings forecasted for 2016 (i.e. 14,3 Mtoe) correspond to the amount reported in the Italian EEAP submitted to the European Commission under the Directive 2006/32/EC. It might be worth noticing that more than 40 Mtoe per year should be saved in 2020 in order to achieve the 20% energy saving target established by the European Energy Efficiency Action Plan in 2007. Greater efforts are therefore needed to achieve this target.

3.6 Energy Efficiency Service financing

Financing is a very important issue in the EES market. As previously mentioned, financing constitutes a significant barrier to small and medium sized EES providers in implementing large EE projects and also limits the degree of competition in the EES market as it separates the supply market into different groups: some projects can only be implemented by financially strong companies while others only by financially weaker companies. Such market segmentation restricts market competition to a wide extent and therefore slows down EES market development.

An interviewee noted that large companies have a tendency to work with the international financial market, while small companies go to local bank directors who offer them traditional loans. The problem is that the loans offered are generally short-term loans which hence do not cover the entire investment payback period for an energy efficiency project, therefore often a new loan from a new bank is necessary to cover the first loan. This explains the industry’s dependence on the banking system. This problem of course occurs seldom in the tertiary sector as there is more limited


34

business risk – hospitals, train stations, schools, etc. can not close down. As we will also see later, the problem for banks is collateral: the loans they offer are generally guaranteed by the borrower’s private assets rather than by project results. Ideally loans offered in energy efficiency might be similar to those for instance used for aqueducts, sewage systems and waste incinerators which are guaranteed by cash deposits and have longer terms (in fact this type of projects will ‘never’ cease to provide returns on the initial investments).

Looking more closely at financial practices, the FIRE Survey also showed that around 35% of the sample declared to directly finance EES improvement measures investing internal funds, another 35% of the companies surveyed declared their ability to find third party finances. In 30% of the cases, financing is divided between the ESCO and the client while 23% of the sample said to resolve to other financing mechanisms such as project financing schemes. According to one of the experts interviewed, third party financing is more frequent in the public sector, for large projects where it is however often mixed with project financing47.

The survey also analysed the factors that banks and other financial institutions consider to support project implementation. It is interesting to notice that none of them focus on project themselves or carry out a life cycle cost/benefit analysis. The survey results concerning ESCO experience with methodologies used for financial assessment of a project by banks are reported herebelow 48.

• payback period: 60%

• net present value: 42%

• internal rate of return: 42%

• other: 16%

During a time of economic slowdown, and progressive legislative developments, it appears logical that the payback period is so relevant in a financial decision. However, as one of the experts interviewed highlighted, there exists a general idleness in the banking system, for what concerns energy efficiency services: for instance, financing energy performance contracts could depict monthly savings as monthly mortgage rates, thereby allowing financial institutions to apply high interest rates to their loans. In fact banks often do not understand that it is the savings themselves that form the basis of profits and not financial speculation over them.

In confirmation of this, another interviewee argued that pure third party financing, as intended in energy performance contracts is hardly applied as banks do not take into consideration the economic and financial performance of projects themselves and always require collaterals other than guaranteed savings.

The FIRE survey often mentioned in this document, graphically illustrates the use of additional “financial” instruments provided by the government, distributed as follows among the companies sampled: 98% of them are active on the white certificate market, 37% implement projects profiting from tax deductions, 16% of them implement projects benefiting from subsidized loans and 14% of them take directly or indirectly49

47 Project Financing is a long term financial operation that consists in using a newly constituted company, so-called Special Purpose Company, that serves to maintain projects assets separate from those of the proponents of the investment initiative (called “promoters”). 48 Percentages reported below are to be interpreted in the following manner: in case of payback period 60% of the ESCOs interviewed declared that this methodology was the one preferred by banks when assessing their project, in case of net present value 42% indicated that this methodology was the one preferred by banks when assessing their project, etc. 49 Depending on whether the owner of the renewable energy micro-generator is the EES provider or the energy end-user, benefits from the feed-tariff mechanism are directly enjoyed or indirectly enjoyed


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advantage of the so called “Conto Energia” described in paragraph 2.4. White Certificates can serve as an additional financial instrument to partly finance ESCO business because ESCOs may sell energy savings in the form of market certificates to obliged electricity and gas distributors; tax deductions are applied to a number of measures (see paragraph 2.4 for more details) cover from 20% to 55% of measure implementation costs. An example of subsidized loan is the so called “Mutuo a-profitto©”50, an innovative financial scheme for families, natural persons owning homes and condominiums (very common in Italy) introduced to implement energy efficiency measures and foster the use of renewable energy sources at zero cost for citizens; in practice it consists in an interest free bank loan for which the interests are paid by local administrations and financial institutions, thus activating a co-funding mechanism by the banking system and the public administration. So far, according to the interviewee who illustrated this financial instrument, 12 banks have joined the initiative, granting citizens the possibility to borrow up to 50.000 Euros for seven years, free of interests51. Rates of repayment are adjusted according to the investment payback period and to the savings achieved on the energy bill.

An interviewee mentioned that according to the Department of Energy in the United States, if the investment repayment of an energy efficiency project does not count at least 30.000 US dollars per year, then the energy efficiency service (especially through energy performance contracting) is not considered as economically viable by EES providers. This brings us back to the question of territorial public-private partnerships raised in the introduction; “mixed” ESCOs52 are an ideal solution as they would ensure a certain level of cash inflows from energy efficiency projects, by aggregating together different parties interested in energy savings, i.e. aggregating territorial demand.

Some of the experts interviewed proposed a number of financial solutions, some of which already activated in other EU states. First of all the idea of applying insurance principles in the energy efficiency market and contractual agreements, both in the private sector and in the public sector. In Germany an insurance company, MUNICH RE, created a new insurance policy for energy efficient electricity production from renewable sources: at the end of august 2008, MUNICH RE came into agreement with a Chinese firm producing and installing photovoltaic modules (NEXPOWER), guaranteeing 90% of plant performance – in case the plant did not reach the guaranteed performance level, MUNICHE RE would finance its replacement with a new plant53. This of course facilitated the NEXPOWER consumers in obtaining financial resources from banks, to finance installation of new equipment.

In the public sector, the same principle could be applied to a fund for energy efficiency: similar to that described in paragraph 2.4, such a fund could be devoted to financing policies and instruments insuring the expected cash flows from energy savings so that they could serve as a loan guarantee for the energy performances of new facilities and equipment installed for the improvement of energy efficiency, thereby reducing the technical and economic risk of it for the investors. More specifically, if the impact of energy efficiency measures on the avoided external costs of consumption (pollution, global warming, climate alterations, and so on) were recognised and somewhat quantified, this would enable the government to finance energy saving insurance

(because the energy end-user is anyhow stimulated by the mechanism to ask for EES provider intervention for the micro-generator installation) by the EES provider. 50 This term could be literally translated as “Profit Mortgage”. 51 In the less than three years, more than 1000 families took advantage of this mechanism and more than 16 million Euros were invested. 52 Detailed discussion over “mixed” ESCOs is provided in the volume by Fernando Savorana, Maurizio Fauri and Antonio Savorana, E.S.C.O., ed. Flaccovio Dario, 2008. 53 http://www.munichre.com/en/press/press_releases/2009/2009_06_16_press_release.aspx


36

policies (and even more so if ESCOs complying with sufficiently tight requirements related to projects implemented were officially registered, as suggested in paragraph 2.4). Such a mechanism would also stimulate the banking system as it would reduce the costs of the energy efficiency intervention, since the risk would be lower, and would hence allow for lower interest rates. In such a picture, the creation of a public fund insuring bank investments in energy efficiency could also be justified as an additional benefit for society.

Another interesting solution suggested by an interviewee is centred on the use of energy bills. In fact, the companies performing billing have a potentially interesting instrument at hand for energy efficiency. If an EES provider also does billing, it can catalogue energy savings from its EE interventions directly on its EES clients’ bills. See the diagram below for an illustrated example.

This mechanism represents a significant opportunity for electricity and gas providers who nowadays, following the liberalization of the energy market, find themselves competing in a market where clients have the possibility to change provider every semester. If energy savings are tied to the energy bill, then the client himself is tied to the provider for the whole duration of the contract, i.e. until energy savings will have entirely repaid the initial investment.

Contracts are widely discussed in the EES market. Ideally, energy savings should be obtained through energy performance contracting, however, this is not often the case. The first contracts that appeared in Italy in the 80’s were based on the provision of a turnkey service, quantifiable for instance in degree days (for buildings’ temperature), in hours (for instance in lighting services) or in volume (for hot water). The first contracts, known as “servizio calore” (heating service) only covered the management and maintenance of e.g. a boiler, without obligations in case of damage (i.e. the client simply had to purchase a new boiler in case of damage). A law in 1991 (10/91) widened the scope of such contracts including also the installation of new boilers, and introducing technical rules for maintenance. Later on, the so called “servizio energia”54 (energy service) was developed as a supply contract allowing for the explicit forecast of energy savings inside the contractual text, and providing for “qualified detention” – new plants remain under the ownership of the provider until the contract is over; however, service fees were not tied to energy savings achieved. Later on, “servizio energia plus” was introduced as an extension of the previous “servizio energia”; the new contract also included the commitment by the provider to reduce the consumption

54 “Servizio Energia” is described in article 1, paragraph 1, letter p), of the presidential decree DPR

26.08.1993, no. 412

A company sells energy to a client and offers EES upon request

The client requests the substitution of its boiler with a more efficient one ensuring a certain number of KWh saved per month

The company replaces the boiler (under an EPC with shared savings), adjusting the total of the energy bill to the savings achieved; since savings are shared, he only deducts the client’s part of savings from the total bill.

The client repays the energy efficiency improvement measure through its energy bill.


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of primary energy for winter heating of at least 10% with respect to what is indicated in the “Certificazione Energetica” (energy certification)55 and to install, where possible, a thermo regulating system. Finally, the 2000 Budget Law (art 30, paragraph 8.e) identified the Global Service contractual formula as best suited to govern the provision of different and interrelated services by a single provider in the public sector, ensuring high levels of efficiency and management effectiveness so this type of contract is also used a lot but it remains more similar to traditional supply contracting than to energy performance contracting.

Servizio Calore contracts are still widely used in the public sector, particularly in public healthcare (hospitals were the first ones to outsource heating services in the public sector). However, some Servizio Calore contracts are being substituted by Servizio Energia (plus) contracts to give more weight to energy savings. Global Service contracts are also largely applied to energy efficiency services, though they do not ensure energy savings, they are especially used in the public sector (public calls for tender commonly base decision-making on the fixed service cost – see paragraph 3.1). Also, Servizio Energia and Servizio Energia Plus contracts are generally used to regulate provision of heating and electricity in buildings (public, and private to a lesser extent).

Energy performance contracting is different from Servizio Energia Plus in that the former type of contract, as depicted in the European Directive on energy end-use efficiency and energy services (2006/32/EC), is a contractual arrangement where investments “are paid for in relation to a contractually agreed level of energy efficiency improvement”, whereas the latter type of contract only obligate the parties to reach a certain level of energy savings, without tying initial investments recovery to such savings. It follows that energy performance contracts are the ideal instrument to foster energy efficiency. In fact, as pointed out by an interviewee, the development of such contracts in the United States lead three governments (Bush, Bush Junior and Clinton) to drastically reduce if not eliminate funds for energy efficiency arguing that energy performance contracts alone were a very powerful instrument to promote the improvement of energy efficiency.

One of the experts interviewed said that a barrier to energy performance contracting is the lack of accurate frequent measurement of energy consumption at final user level (which is done electronically in other countries) and in relation with the environment (in New York City, the newspapers provide the city degree-days every day). Energy is strategic at national level but it is rarely so for final users. It is the public sector that mostly uses this type of contracts as the decision-makers do not care whether they own the plant or equipment installed or not, declared this interviewee.

Another expert noted that the scarce financial resources available for non-core business activities should encourage the use of energy performance contracts as these do not necessarily require investments by the company requesting energy efficiency services. He also underlined that these types of contracts are widely used for financing cogeneration plants, heating management and efficient lighting; also, he said that around 50% of these contracts are usually based on ‘guaranteed savings’.

All in all it was highlighted that problems related to energy performance contracting mainly come from three uncertainty factors:

• normative/economic uncertainty linked to the magnitude of future cash flows from an energy efficiency project’s energy savings as legislation is in constant progress and transformation (this is especially related to the applicable energy tariffs and monetary incentives in place);

55 Energy certification for buildings became obligatory with the issue of the legislative decree Dlsg.

192/2005 (art. 6 paragraph1-bis, letter c)).


38

• financial uncertainty linked to incentives such as white certificates as these are market-based mechanisms and are therefore subject to market volatility;

• technological uncertainty linked to new and innovative technologies used.

Servizio Energia Plus contracts could be more effective if the savings were required to be counted in energy volume rather than in monetary terms: a 10% reduction in the energy bill can be achieved by a provider who is able to access lower priced gas, or a deduction of value added tax on the provision of energy. Also, as there are no monitoring systems in place, it is hard to identify the actual savings in terms of KWh. This type of contract therefore can be further improved to become a more effective instrument to improve energy efficiency and promote EES.

In spite of all this, energy performance contracts are not widely used across the Italian territory. This is because there are barriers to third party financing which is essential for projects where available funds (of the EES provider) are not sufficient to cover the whole initial investment. Such barriers are rooted in the banking system that remains very reluctant to finance projects based on energy savings guarantees for collateral (as also discussed above). In general therefore, energy performance contracts tend to be used on small energy efficiency projects, especially by ESCOs, whereas utility companies are more likely to use Servizio Energia or Servizio Energia Plus contracts for the sale of electricity and heating (also larger projects).

An expert interviewed underlined that based on his experience in the sector, he deemed the concept of energy performance contracting introduced by the European Directive 2006/32/EC to be misunderstood by most market players. Indeed, conceptually and formally, it should be understood as the establishment of a joint venture for the achievement of a common goal, rather than as a service agreement (whereby a service is provided in exchange of a previously agreed fee – like the other types of contracts described above). From such a viewpoint, the parties involved into the contractual agreement, aim to achieve energy savings, measured in KWh, together, as a common objective, for which one party invests capital resources and the other invests technological and human resources, both of which will be repaid by sharing the economic savings (avoided costs) derived from the realization of the common goal. Such an approach creates a win-win situation where all parties involved gain from the investments made and improvement in energy efficiency is assured.

The European Directive 2006/32/EC therefore introduced a new concept in the definition of contracts for energy efficiency: while service agreements are such that the client aims to save money on his energy bills (therefore his goal is an economic one) and the provider aims to sell and be paid for the provision of a service (also an economic goal), energy performance contracts are based on a common objective of the parties, an economic and technical one (as savings are determined in energy volume).

In spite of all the above, the most commonly used version of energy performance contracts is that ensuring the client a % reduction in his energy bill, in terms of amounts to pay. Energy performance contracts based on savings in energy units are extremely rare as they imply that the provider be able to determine the level of energy consumption (in KWh) prior to the implementation and subsequently to forecast and guarantee the energy savings (in KWh) achievable after the implementation of the project.

There are however some drawbacks to energy performance contracting, besides the difficulties found in obtaining financing from third parties because the system is very recent and therefore the legal system itself is not acquainted with it (of course, there are no standard models for energy performance contracts yet), so there can be for instance risks linked to volatile energy market prices, or a risk of fraud. An example


39

was provided by an interviewee: an ESCO offered energy efficiency improvement measures at zero investment costs for clients (through energy performance contracts) and obtained a huge commercial success obtaining 25 million Euro starting from nothing (it even won contracts against a large competitor). In the contracts the ESCO offered, future cash flows from energy savings were used as a guarantee for bank loans taken by the ESCO itself. The ESCO chose a type of loans that would allow it to only start repayment after two years from the pre-determined start of operations. However, after two years the ESCO had not started any of the projects agreed (as it probably had never intended to do it), though it had been spending the money from the loans and hence filed bankruptcy without having repaid any of the loans taken to implement the energy efficiency projects.

3.7 Most commonly adopted and promising marketing s trategies in the EES market sectors considered

There are two main variables defining the strategic structure of the EES market:

• being part of a multi-utility group or multinational company active in the energy sector which guarantees greater visibility, a large consumer base and financial resources

• being a pure- or mixed-ESCO approaching the energy efficiency service market

These two variables separate the market into two corresponding strategic groups. The first group is typically composed of companies coming from the engineering sector (facility management, installation and maintenance of thermal and refrigerating plants, global service), that usually manage directly the construction and/or sale of new plants (an activity that is not necessarily offered by ESCOs) and are able to finance large energy efficiency projects because of their parent company’s resources. This group includes companies such as SIRAM, COFATHEC SERVIZI, ELYO ITALIA, FENICE, CAROLI GIOVANNI, etc.

The second group typically offers an “integrated service” that starts from energy audits and ends with the management and maintenance of new plants, determining the achievement of energy use rationalization and energy savings. Normally these companies are more recent (2000’s) and small or medium sized. This group includes GENERALE ENERGIA; AZZERO CO2, PIANETA, RIENERGIA, etc.)

The market strategy adopted by the first group derives mainly from the fact that initially energy efficiency improvement measures were only demanded by the public sector. One interviewee in fact mentioned that good knowledge and “use” of public procurement rules was an important competitive asset. Unfortunately, the public-decision making process is not entirely based on project assessment and lifecycle cost analysis but rather on the total cost of project implementation (net present value) and on the predicted energy savings. Hence competitiveness was not determined by project characteristics and quality of services offered but rather on experience in public tenders.

Pure ESCOs are instead not numerous enough today to feel the pressure of competition and thus the need to innovate and invest in research and development. Where there is some level of competition, service customization is the most important asset. The most delicate project phase for pure ESCOs is the initial energy audit carried out to assess energy consumption levels, estimate potential energy efficiency gains and thus establish future energy savings to be achieved through project implementation. This is a crucial phase because ESCO profits are directly linked to the level of energy savings achieved by the project itself.


40

The fundamental barrier separating the two groups is represented by financial resources: as previously mentioned, large companies tend to only focus on large projects which are more profitable, while small ones only have the financial capacity to manage small projects. Potential solutions to this problem are illustrated in the previous paragraph.

According to one of our interviewees, the most delicate and longest step in an energy efficiency project is the actual sale of the services because it involves at the highest degree the credibility and reliability of the EES provider, characteristics that are absolutely fundamental to ensure success with clients. The importance of these features stems from the fact that by its nature, the energy service is deeply implanted in the production processes of the customer. The EES provider must therefore be able to demonstrate and guarantee its services in a perfect and flawless way for the whole duration of the contract. Another very important step in selling the service is knowing how to guarantee the customer an accurate estimate / measure of the forecasted savings achievable under the contract, including all assessments required for tariff calculation. Finally, the technological aspects of the project are also crucial for its sale.

3.8 Summary on existing EES market offer

The following tables summarise the main information of the ESCO and energy company EES market as reported in sections 3.1, 3.3, 3.4 and 3.6. Tables are filled in by following the compilation example reported in the ANNEX I.

Table 8 : ESCO EES market

Sectors EES market status

ESCO type

Positioning in the EES product value chain

EES Financing

Incentives and barriers

Existing Policy mix

Primary and secondary schools

Not well developed

Public Information and energy advice

Client funds or TPF

Split incentives, small load factor

Regulation, MBIs

Universities Emerging/ Not well developed

Public Project design, Plant and equipment supply and installation, information and energy advice

Client funds or TPF

Regulation, MBIs


Emerging/ Not well developed

Public All Client funds or TPF

Principal/agent problem

Regulation, MBIs

Health/Hospitals Very well developed

Private All Client funds or TPF

Economically efficient to outsource heating services

Regulation, MBIs


Public housing Not well developed

Public Information and energy advice

Client funds or TPF

Split incentives, problem of

Regulation, MBIs


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squatters

Hotels/hospitality Well developed

Private Energy audit, project design, plant and equipment installation

Client funds or bank loans

Fashion trends: summer overload due to glass walls and warm lighting

Financial incentives, regulation, market based instruments

Office, commercial

Not well developed





Retail Not well developed





Industry Well developed

Private Energy audit, project design, plant and equipment installation, results verification and measurements, management and maintenance


Vertical fragmentation of industry

Regulation, market based instruments, financial incentives

Private sector

Residential Emerging Private Project design, plant and equipment supply and installation


Small project size, split incentives, lack of information

Financial incentives, MBIs

Table 9 : Energy Company EES market

Sectors EES market status

Energy company type


EES Financing


Existing Policy mix


Na Na Na Split incentives, small load factor

Regulation, MBIs

Universities Na Na Na Regulation, MBIs

Institutional Sector Local

administrations (municipalities, provinces,

Emerging/ Well developed

Energy distributors, Retail energy sale

All Client funds or TPF

Principal/agent problem

Regulation, MBIs


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regions) companies

Health/Hospitals Well developed

Energy distributors, Retail energy sale companies

All Client funds or TPF

Economically efficient to outsource heating services

Regulation, MBIs

Public housing Na Na Na Split incentives, problem of squatters

Regulation, MBIs

Hotels/hospitality Fashion trends: summer overload due to glass walls and warm lighting


Office, commercial

Na Na Fashion trends: summer overload due to glass walls and warm lighting


Retail Na Na Fashion trends: summer overload due to glass walls and warm lighting


Industry Not well developed

Vertical fragmentation of industry


Private sector

Residential Emerging Electricity and gas distributors

Information, awareness raising, implementation


Small project size, split incentives, lack of information


3.9 Summary of potential needs for EES in the diffe rent demand sectors

The summary tables reported hereunder have been compiled based on the information reported in sections 3.2, 3.3, 3.4 and 3.6.

These tables relate to new and promising EESs that are or might be provided by ESCOs and energy companies in Italy. A summary table compilation example is reported in the ANNEX I.


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Table 10: ESCO EES market

Sectors ESCO type


EES Financing


Existing Policy mix


Public-private joint venture

All 3a Split incentives, small load factor, relevant technical saving potential for lighting systems

Regulation, MBIs

Universities Public-private joint venture

All 3a, 3b Relevant saving technical potentials for lighting systems, ICT

Regulation, MBIs


Public-private joint venture

All 3b Principal/agent problem. Relevant technical saving potentials for lighting systems, ICT, CHP, tri-generation

Regulation, MBIs

Health/Hospitals Public-private joint venture

All 2,3a Relevant technical saving potentials for lighting systems, CHP, tri-generation, air conditioning

Regulation, MBIs


Public housing Public-private joint venture

All 3b Split incentives, problem of squatters, Relevant technical saving potentials for lighting systems, insulation measures

Regulation, MBIs

Hotels/hospitality private All 2, 3b Fashion trends: summer overload due to glass walls and warm lighting; Relevant technical saving potentials for lighting systems, appliances, insulation measures


Private sector

Office, commercial private All 2, 3b Fashion trends: summer overload due to glass walls and

Financial incentives, regulation, market based


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warm lighting instruments

Retail private All 2, 3b Fashion trends: summer overload due to glass walls and warm lighting; Relevant technical saving potentials for lighting systems, insulation measures, air-conditioning


Industry private All 2, 3b Vertical fragmentation of industry. Relevant economic saving potential for motor drives, building insulation measures, ICT, rephrasing, air conditioning, CHP, trigeneration


Residential Public-private joint venture

All 1, 3a Small project size, split incentives, lack of information; Relevant technical saving potentials for lighting systems, appliances, insulation measures, air-conditioning, ICT, home automation.


Table 11: Energy Company EES market

Sectors Energy company type


EES Financing


Existing Policy mix


Na Na Na Split incentives, small load factor, relevant technical saving potential for lighting systems

Regulation, MBIs


Universities Public-private partnership

All 3a, 3b Relevant saving technical potentials for lighting systems, ICT

Regulation, MBIs


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Public-private partnership

All 3b Principal/agent problem. Relevant technical saving potentials for lighting systems, ICT, CHP, tri-generation

Regulation, MBIs

Health/Hospitals Public-private partnership

All 2,3a Relevant technical saving potentials for lighting systems, CHP, tri-generation, air conditioning

Regulation, MBIs

Public housing Public-private partnership

All 3b Split incentives, problem of squatters, Relevant technical saving potentials for lighting systems, insulation measures

Regulation, MBIs

Hotels/hospitality Energy distributors, Retail energy sale companies

All 2, 3b Fashion trends: summer overload due to glass walls and warm lighting; Relevant technical saving potentials for lighting systems, appliances, insulation measures


Office, commercial

Energy distributors, Retail energy sale companies

All 2, 3b Fashion trends: summer overload due to glass walls and warm lighting


Retail Energy distributors, Retail energy sale companies

All 2, 3b Fashion trends: summer overload due to glass walls and warm lighting; Relevant technical saving potentials for lighting systems, insulation measures, air-conditioning


Industry Energy distributors, Retail energy sale companies

All 2, 3b Vertical fragmentation of industry. Relevant economic saving potential for motor drives, building insulation measures, ICT, rephrasing, air conditioning, CHP, trigeneration


Private sector

Residential Energy distributors, Retail

All 1, 3a Small project size, split incentives, lack of information;



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energy sale companies

Relevant technical saving potentials for lighting systems, appliances, insulation measures, air-conditioning, ICT, home automation.


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4 EES product and business strategy good practice examples

Energy Efficiency in Schools: Modena, Emilia Romagn a

This project was born from the need to reduce operational and maintenance costs of school buildings and at the same time to raise awareness on the rational and sustainable use of resources, and was such that each year, each participating school received a 50% share of all financial savings achieved by the municipality, due to the reduction in energy consumption in the school. The following activities were carried out throughout the project: building energy audit (autumn 2002), definition of baseline and potential savings, management of heating systems based on well-defined savings objectives (1998-2003), building energy retrofit, ratification of voluntary agreements between interested schools and the municipality, financing of school training programmes on energy management, professional training update for the teachers, diffusion and replication of the model in other schools.

In 2002, 4 schools of the municipality and 9 institutions of the province participated in the project, while there were 8 schools of the municipality and 12 institutions of the province in 2003. In six years energy consumption dropped by 26% in the municipality of Modena. This project was thus introduced in the provincial plan of action for energy and sustainable development in July 2002. The local agency for energy and sustainable development took up project promotion activities and management alongside the Modena municipality council departments for the environmental policies (in particular the energy office) and for the estate management (in particular the building sector) and the Modena province.

The advantages and strengths of this project were the involvement of schools and students, and the cooperation between the environmental and building sectors. On the other side, weaknesses were found in the coordination of public third parties involved, and the high level of internal conflicts.

Concerning replicability, other contacts were made with other local energy agencies to spread the initiative and the project itself was selected for the ERA (Emilia Romagna Ambiente) prize 2004 for the Eco-Energy Efficiency category.

Action Plan for Energy Efficiency: Padova, Veneto

The territory under the responsibility of Padova Municipality is very urbanised and presents levels of atmospheric pollution always above the limits provided by current legislations. The project has been promoted by the Padova municipality environment department between 2006 and 2008 and intended to reduce atmospheric pollution by saving energy and thus decreasing the level of greenhouse gas emissions. Two Sustainable Energy Action Plans (SEAP) have been developed by the collaboration of a forum of local actors and defined specific energy saving targets56 to be achieved within three and five years respectively. These plans aimed to identify the best available energy efficiency interventions applicable in the municipality and to define the potential savings and environmental advantages achievable through the implementation of said interventions. 56 These targets relate to: a) energy and water consumption reduction by residential and industry of 9%, related to 2005 value, by 2012, with guarantee of ecological building methods and welfare and environmental health standards; b) increase of RES contribution to energy supply in Padova, through at least 12% RES penetration of local energy use by 2010.


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All activities carried out pertain to three different directions of intervention: the improvement of the municipality contract for the provision of electricity, the improvement of the quality of existing plants and the improvement of energy management techniques. The areas of intervention concern 4 municipal macro-sectors: public lighting plants, traffic lighting plants, buildings, parking lots, the launching of a photovoltaic parking lot for public transport and the renewal of public transport vehicles.

The interventions carried out on the municipal buildings (boiler substitution and insulation) have allowed annual energy savings of 35%, equivalent to 8,200,000 kWh; the interventions on public lighting (by replacing 15,800 low efficient lamps with new sodium steam light bulbs) have caused a 36% reduction of annual energy consumption, or 6,500,000 kWh; the interventions on traffic lighting have decreased annual energy consumption by 85% (by replacing old lamps with new LED ones or with roundabouts) or 290,000 kWh. The renovation of public transport with the purchase of methane vehicles and the transformation of fuel vehicles into biofuel vehicles, has brought a reduction in CO emissions by 75%, in CO2 emissions by 26%. Information and awareness raising activities were carried out in schools, in municipal offices, and offices of category associations. Voluntary agreements with associations of professionals responsible for thermal plants maintenance and operation and property managers have been stipulated and a local network of energy mangers has been created in order to stimulate the implementation of the above mentioned measures.

This project was part of the European BELIEF program (Building in Europe Local Intelligent Energy Forums) and it was found that not only did the project have direct impact on the public energy bill but also that it fostered energy efficiency in the private sector too. A key factor to be improved for the future is the “transfer of experience” through greater information and communication campaigns.

This type of project can be replicated in other countries and municipalities.

Eni 30% campaign.

Based on a study of the average energy consumed by a 4-member Italian family in the areas of transportation and according to their domestic habits, the Eni 30% Campaign provides advice on the approach to be taken (precisely 24 recommendations) in order to decrease by 30% domestic expenditure on energy consumption. With this campaign, Eni also intends to present itself as a catalyst for the energy efficiency debate by involving other actors of the economic, industrial and social world.

Some of the partners who have already joined the campaign are, for instance, Coca Cola, HBC Italy, Compagnia delle Opere, Venice City Council, IBM, Pirelli Tyre, Powersafer, STM Microelectronics, Telecom Italy with the Alice portal, Touring Italy and Unicredit. In this framework, Eni cooperated with the Osservatorio Permanente Giovani-Editori (permanent observatory of young editors) focusing on raising awareness on energy efficiency among Italian teachers and, through them, among second-year middle school students in the country for the school years 2007-2008 and 2008-2009.

Over the last year, thanks to the cooperation with GfK-Eurisko, the first results of this campaign have emerged: 40% of respondents have at least started to consciously follow one of the 24 advices proposed by Eni and almost 90% are willing to follow


49

more of them. A panel composed of 100 families that follow the 24 recommendations and 100 that continue to behave in the usual way, have been monitored continuously until October 2008 in order to compare the actual energy consumption of the two groups.

The effectiveness of the campaign is also linked to the high visibility that Eni has granted to this initiative mainly through extensive media coverage including TV and cinema, large billboards, Internet websites, impressions, brochures, radio broadcasts, newspapers and magazines, in addition to the dissemination of many promotional items.

Being an initiative that addresses the public at large, the experience can be replicated by any other large energy company in any other country.

The table 12 below is filled in with the main information related to the above described good practice examples by following the compilation example reported under the report Annex II.

Table 12: Summary information about the best practice examples described

Good practice example 1



EES provider Modena Municipality technical staff and Modena Energy Agency

Padova Municipality technical staff, installation companies, facility management and operation companies.

Energy company

Sector(s) addressed


Municipality: lighting, public transport, electricity provision, municipal buildings

households, private transport

Technology/field of application

Energy management, training and information, efficient heating and lighting systems

Boiler replacement and insulation, sodium steam light bulbs, LED lamps, round tables, information and awareness raising, methane vehicles, photovoltaic

Communication and awareness raising

EES value chain stages considered

Energy audit, information and advice, measurement and verification, project implementation

Energy audit, design of solutions, implementation of EE solutions, maintenance of plants, measurement and verification, information and advice

Information and advice, measurement and verification

EES financing EES provider financing Mixed financing Internal funds


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typology and shared savings (Municipality financing + EU funding)

EES Contract type

Contract with schools: mutual agreement between the municipality and the schools to share financial savings

Existing policy instrument(s) stimulating EES implementation

Municipality urban planning, voluntary agreements with property managers and professionals responsible for thermal plant operation and maintenance.

National and international Political agenda

Barriers overcome

Inefficiency in the use of heat and electricity, lack of information on EE

Financing, lack of information

Ignorance of energy efficient habits


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5 Interviews of representatives of Italian ESCOs and energy companies

Despite the energy service market has been developing very rapidly in Italy during the last years, sufficiently detailed information and comprehensive analyses about which ESCOs/energy companies are really active and about their main fields of activity are still quite scarce. In order to attempt filling this information gap and gather a rather comprehensive overview of the Italian energy service market a series of interviews have been performed among representatives of ESCOS and energy companies in order to get an overview of the company situation of a sufficiently high number of these actors operating in the EES market. To this aim, a detailed questionnaire has been prepared and distributed mostly among about 200 ex-students of the Ridef Master course yearly organized at the Politecnico di Milano57 as many of these ex-students are now working for energy companies and ESCOs. The answers to these questionnaires have been collected between August and October 2009 and have been analysed for the EES market overview presented in the previous chapters of this report. Given the low number of questionnaires returned (indeed only 15 interviewees filled in and returned their questionnaires), the sample surveyed cannot be considered as statistically significant. However many of the answers received provided useful insights about the Italian EES market situation and served for the analysis presented in this report. The text below provides an overview of the sample analysed and the main indications received from the persons interviewed.

57 The aim of the master course is to create an Energy Manager, that is a qualified expert able to deal with technical issues and economic and legislative matters, having a global overview of the whole energy transformation process, that goes from the production to end use, and having basic knowledge about a series of environmental issues such as sustainable transport or emission abatement strategies.


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1.1. Number of companies analysed by type

7 Energy Service Company (ESCO)

1 Multiutility58 company

3 Energy consulting company

1 Facility or property management company

1 Independent specialist company

1 Energy agency

1 Association

1.2. Number of companies analysed according to societal characteristics

7 Public capital

3 Private capital

5 Mixed capital

1.3. Average percentage share of EES sales in Italy and abroad

• Average % of sales in Italy: 100

• Average % of sales abroad: 0

58 The term multiutility company refers to

organizations selling public services (at least two) such as: electricity, natural gas, oil, water, sewage, telecoms, postal services, etc.

2. Company activities in the EES market

2.1. Number of company analysed by sector of operation in energy efficiency services (EESs)


4 Primary and secondary schools

4 Universities

11 Local administrations (municipalities, provinces, regions)

6 Health and hospitals

5 Public housing and buildings

Private Sector

8 Hotels and hospitality

11 Office, commercial

6 Retail

8 Industry (most relevant sectors): SME, Building, Food, Manufacturing

9 Residential

2.2. Number of companies analysed according to average size of their client companies in the industrial sector.

4 Large to very large industrial companies (more than 250 employees)

11 Small and medium companies


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(less than 250 employees)

2.3. Number of companies analysed according to position along the EES value chain

5 Research and development (of new efficient technology and services)

8 Awareness raising (information dissemination and capacity building)

12 Information and energy advice (energy analysis and audits)

11 Identification of measures and solutions

10 Project technical planning

2 Financing of the project

8 Project implementation (equipment/property/facility maintenance and operation …)

7 Optimisation of technical operation (e.g. energy management)

8 Monitoring, measuring, verification and targeting of savings

1 Energy and/or equipment supply

2.4. Potential for new and promising developments in the EES value chain

According to some of the companies interviewed, there exists potential development for a few of the EES Value Chain stages, namely project technical planning, project implementation, energy analysis, metering and monitoring and energy

management. Other interviewees said that all stages are to be developed in the present and in the future if companies want to be able to offer high-quality customized services. Finally, there is also who said that none of the EES Value Chain stages have development potential at the moment since most energy efficiency interventions are offered as complementary services in public tenders so as to increase the probability of being assigned a public contract. Finally, some companies also said they may expand to provide energy supply if they start operating in the generation, cogeneration and trigeneration businesses. (5 of the respondents did not answer the question).

2.5. Number of analysed companies by technologies or fields of application used for EES.

1 Combined heat and power

10 Refurbishment

2 Fuel switch

5 Burner improvements

11 Renewable energy utilization

3 Production of thermal energy

7 Public lighting

8 Indoor lighting

5 Optimisation, maintenance, supply of electrical motors and drives

6 Generation/cogeneration

6 Heating, Ventilation and Air Conditioning

3 No Response


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2.6. Potential for new and promising EESs in the technology and fields of application listed above.

The respondents wrote that there exists potential for development in the following fields/technologies:

- public lighting, because of the great energy saving potential in spite of the lack of efficiency planning competences in the public sector;

- renewable energy source utilization in Italy as there is growing interest in it from investors;

- electrical motors and drives;

- Mini CHP also has great potential though barriers such as high costs of devices and bureaucratic difficulties have to be overcome;

- consulting and city planning for large scale refurbishment projects are not adequately developed;

- district heating;

- heating, ventilation and air conditioning.

2.7. Number of companies selling customized services (e.g. optimisation of equipment, EPCs, etc.); importance of customized services; added-value of customized services compared to the standard services provided.

Among the companies interviewed, only 3 of them said to offer customized services, and consider them very important. They highlighted their added value in the possibility to create greater economic benefit and develop best practice cases.

2.8. Number of companies analysed according to their perception of potential competitors and potential partners among the following types of companies:

Type of company

Potential

partner

Potential competito

r

ESCO 6 4

Equipment or manufacturer supplier

13 0

Energy distributor

5 2

Trading company (wholesale)

5 2

Multiutility59 company

5 3

Energy consulting company

5 8

Facility or property management company

5 2

Equipment installer 14 0

Independent specialist company

1 8

Energy agency

3 5

Financing institution 10 0

ESCO of a finance institution

4 3

No response 1 1

59 The term multiutility company refers to

organizations selling public services (at least two) such as: electricity, natural gas, oil, water, sewage, telecoms, postal services, etc.


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3. Company Operation in the EES Market

3.1. Reasons why companies started operating in the EES market; main factors fostering the start of the venture.

Companies interviewed presented the following reasons for starting their operations in the EES market:

- cultural interest and business opportunity

- introduction of new laws for EE (e.g. required energy certification for buildings)

- similar services already existed for large EE projects, and there was a gap in the supply market for smaller projects

- introduction of the White Certificate market mechanism

- where EE is not a company’s core business, customers may be the ones raising interest in EE services, encouraging the company to enter the market

- EE services were initially offered as complementary services in public tenders to increase the probability to obtain public contracts

(3 companies did not respond)

3.2. Core business of companies analysed

For some of the companies analysed, EES do not represent their core business. In those cases, they indicated their core business as follows:

- health, safety and environmental services

- environmental engineering

- gas and electricity distribution

- global service contracts for the public administration

- information dissemination and provision for the whole building sector

(1 did not respond)

3.3. Type of support received for companies’ activities related to EES from a national or business association.

Only 5 companies said to receive some kind of support through seminars and information dissemination related to EES from national or business organization. One of them further specified that the association supporting them is Confindustria which develops studies related to energy efficiency and reduction of CO2 emissions.

(6 did not respond)

4. Project Financing and Contract Types

4.1. Number of companies analysed by type of project financing most regularly used – (4 did not non respond)

4 EES provider financing

8 Energy user or customer financing

4 Mix EES provider-user/customer financing

5 Third party financing (TPF)

6 Government economic incentives/subsidies

4.2. Potential for new and promising developments among the above listed financial practices

Two companies opined that project financing is likely to see some development in the near future. Others said that TPF (especially through financing institutions) will certainly be


56

encouraged as it is very important for the development of EES. Finally, some noted that public (regional or national) dedicated financing would be very useful to foster the EE market

(4 did not respond)

4.3. Number of companies analysed by type of project contracts mostly used for the provision of EES (5 did not respond)

2 Supply contracting

8

Energy performance contracting (EPC)

- 6 Shared savings - 2 Guaranteed savings

2 Pure service contract

4.4. Potential for new and promising developments among the contract types listed above

All companies agreed that EPC (both with shared and guaranteed savings) is the contract type with greatest potential of development.

4.5. Type of clients most commonly faced (mainly with private or public bodies) and corresponding market approach

6 companies said to work with public bodies (alongside private bodies for most of them) and noted that public bodies are generally more interested in the social and political aspects of energy saving interventions, and that procedures are usually very time-consuming due to the bureaucracy. One company in particular said to work exclusively with public bodies because according to Italian law (based on EU directives), being a public capital company, it can only work with its own shareholders. 3 companies said to work with private bodies and underlined

that these are typically more interested in the economic viability and sustainability of projects, and that they are more sensitive to the energy saving.


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5. Barriers and Incentives for the Development of t he EES Market

According to market experts, there are a number of internal and external barriers that inhibit competition and good business performance in the EES market. For instance, they highlight low awareness, lack of information and high perception of risk among consumers and the lack of government support and high transaction costs for suppliers. These factors limit the growth and development of a competitive and fertile market environment for EES. Last but not least, financing issues have seemed to largely slow down EES market growth.

5.1. Barriers most commonly encountered in the EES market

According to the companies interviewed, the most commonly encountered barriers in the EES market arethe following:

- Low consumer awareness and lack of information on the EES services

- Lack of perception and certainty of the economic advantages and incentives related to EE

- Difficult access to capital (especially for large projects) and lack of financial opportunities

- High costs of efficient technologies

- Lack of investment for the qualification of employers

- Incomplete legal support: existing laws are often not adequate for EE issues or present incorrect technical technical references, or lack implementing decrees

- Public bureaucracy: time-consuming and complicated procedures

At the same time, market experts have identified a number of tools and circumstances that could foster and strengthen the EES market, developing its potential. Among others, they mention a favourable fiscal regime and political stability as positive contextual situations for EES providers and underline the potential effectiveness of financial support and policies by the government.

5.2. Main incentives that stimulated growth and development of the EES market according to EES offered.

Looking at incentives, interviewees highlighted the following ones as being most successful

- 55% tax deduction

- the so called “conto energia”

- creating awareness and information dissemination

- financing a better industry-driven research in EE

- energy efficiency certification

- market liberalisation

- market based mechanisms (though they are not always considered as incentives due to the uncertain value of titles traded on the market)


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6. International and National Energy Policy Instrum ents

6.1. Participation in the Italian Tradable White Certificate (TWC) scheme and role of the scheme in EES market growth

Of all the companies interviewed, only 2 of them said to participate in the Italian TWC scheme, while the rest either responded negatively or did not respond at all. Among those that do participate in the scheme, one of them says that such participation did stimulate the company’s growth in the EES market, while the other said the opposite, explaining that TWC require very lengthy and difficult procedures which as such was refused by most costumers and that it is not remunerable at all.

6.2. Awareness of the Italian Legislative Decree n. 115, 30 May 2008 enunciating the provisions for the implementation of the European Directive 2006/32/EC on energy end-use efficiency and energy services

7 companies confirmed their awareness of the decree in question, while the rest did not respond at all. Among those that recognised the decree, there are diverging opinions concerning its usefulness for the growth of the EES market. Some think the decree could stimulate company activity in the EES market if the decree’s provisions were actually translated in real facts, others said this could stimulate the public sector in particular, some also mentioned that this decree should help facilitate and simplify procedures to obtain permissions and authorizaitions and finally one interviewee underlined that since all suggestions provided in the decree are not manadatory and since there is weak monitoring and control of activities in Italy, the decree is not likely to stimulate market growth.

6.3. Current national and international energy policy instruments in place (regulation, market-based mechanisms, financial incentives, agreements, etc.) considered most successful in stimulating activities in the EES market

All respondents agreed that the most successful and useful policies were financial and fiscal incentives, followed in some cases by market based mechanisms, though concerning the latter there were conflicting opinions.

7. Marketing Strategies and “best practices”

7.1. Most common and successful marketing strategies adopted by companies in the EES market; circumstances and factors determining the success or failure of a market strategy in the EES market

Only three interviewees replied to this question, naming the following factors of success:

- compliance with the code of ethics

- public relations: showing private and public bodies company reliability and success in other EE interventions

- availability of energy consumption data for different technologies and EE interventions and knowledge of the standardization of financial mechanisms especially for economic sectors were access to capital is most difficult (e.g. residential)


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- dissemination of good technical practices and of their applicability and standardization towards local EE players

7.2. Example of “good practices” or “bad practices”

Examples of good practice have been seen in the residential and building sector for what concerns the installation of thermostatic valves, heat generator replacement, insulation improvement of building envelopes and windows energy efficiency improvement.

A couple of examples were also provided by the interviewees:

- “Casa Clima” by WWF

- “LUDABAK srl” – EE for the industrial sector: optimization of energy consumption in productive processes through the installation of a control system based on new inverters.

8. Energy Performance Contracts (EPC)

8.1. Advantages or disadvantages in the practice of energy performance contracting

Disadvantages:

- Economic risks borne by ESCOs (e.g. Risk that the client is not able to guarantee the level of energy consumption on which the contract is based)

- access to capital may be troublesome

Advantages:

- releasing the client from a number of difficulties (risks)

- possibility of scale economies due to the predetermined level of efficiency decided at the time of contract negotiations

8.2. Instrument/tools used to hedge oneself against the economic risk deriving, e.g. from significant changes in market conditions such as high fuel/electricity price volatility

Instruments and tools used to hedge against economic risks:

- partnership with a bank to help the ESCO understand well and study the client’s current and future (forecasted) financial situation as well as potential markets developments

- manage EE interventions as a portfolio of financial assets (e.g. Out of a hundred interventions, five may fail but will be counterbalanced by the success of the remaining 95)

- write contracts that consider energy price volatility (e.g. If the price of energy changes, the tariff applied by the ESCO also changes – if the energy price rises, the monetary equivalent of energy saved increases and the additional monetary gains are split between the parties)

- none


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8.3. Instrument/tools used to hedge oneself against the risk that counterpart may change the final use of the building/factory/estate on which the contract is based, thus negatively altering the effects of the implemented energy efficiency improvement measure; existence of the possibility – based on the EPC – to dispute the contract in such a situation

Instruments and tools used to hedge against risk that client substantially change his level of energy consumption:

- contract is written as clearly as possible in order to avoid contract disputation

- use of “safety measures” (e.g. If the ESCO knows there is 30% potential savings, it will only guarantee 25% of them)

- contract clauses including sanctions or debt repayment in case of non compliance with the contract by the client

- use of insurance

- none

8.4. Ways in which the performances guaranteed towards the client are backed up, supported and then demonstrated/validated. Documents/proofs usually provided to show the client that an intervention has achieved its expected level of energy savings.

How the companies interviewed guarantee savings:

- energy audits, regular measurement, verification and monitoring of results with the installation of an energy meter, experience and technical knowledge

- granting of an energy certificate guaranteeing the savings achieved

- feasibility studies

- green rating label

8.5. Ideas or suggestions for policies, procedures or other instruments that could facilitate and foster the use of energy performance contracts in the EES market

The following are the policy recommendations suggested by the companies interviewed:

- government insurance funds to foster TPF

- greater incentives for renewable sources other than photovoltaic energy

- Italian EES market should follow the US EES market as an example in terms of legislation and development of an EE culture

- Comparing our knowledge with the existing one for CO2 titles and carbon offsetting

- Increasing the strategic relevance of EES and EPC at local and national level (market potential is so large that the right policies would be sufficient to foster great businesses)


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ANNEX I: Summary information to be reported in tables 8,9,10 and 11

Hereunder a compilation example of the tables reported in sections 3.8 and 3.9 is provided. The specific example refers to the existing ESCO EES market. The numbers in the table cells related to the positioning in the EES product value chain, to the EES financing typologies and to the existing policy mix adopted in the various sectors refer to the categories listed under the table. The information in the tables related e.g. to local administrations hence indicate that the ESCO implementing EES products for local administrations are mainly public ESCOs covering all EES product value chain stages excepting optimisation and technical operation of the installed solutions and measuring and verification of the savings generated. The EES financing typology adopted by local administration is mainly customer financing and third-party financing with the ESCO borrowing the financial resources necessary for project implementation. The main barrier to EES product implementation is represented by the principal/agent problem (i.e. the investor is different from the beneficiary of the savings) and the existing policy mix is represented by regulation (that in the specific case might be an existing standard related to local administration buildings) and communication/procurement/labels (that in the specific case might be procurement programmes adopted by the local administrations in the country considered). The numbers related to the existing policy mix should be included in the table according to a prioritization criterion of the influences by policy instruments and measures. Therefore regulation (1) comes before communication/procurement/labels (5) in the table because it is assumed that regulation stimulated the EES market for local administrations more than communication/procurement/labels. Based on the information available for the well developed and new and promising EES market related to ESCOs and energy companies in your country, the four tables in sections 3.8 and 3.9 should be filled according the compilation example here provided.

Table : ESCO EES market

Sectors ESCO type


EES Financing


Existing Policy mix


Universities


Public ESCOs

1,2,3,4,5,6 2, 3a Principal/agent problem 1,5

Health/Hospitals


Public housing

Hotels/hospitality

Private

sector Office, commercial


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Retail

Industry

Residential Private ESCOs

1,2,3,6 1, 3b ESCOs not interested in small projects, Insufficient level of information and awareness by consumers

4,1b

Other

EES product value chain stages:

1) awareness raising,

2) information and energy advice,

3) identification of measures,

4) technical planning,

5) financing and subsidies,

6) implementation (operation, supervision),

7) optimisation of technical operation,

8) saving measurement and verification.

Existing policy mix

Provide your overview by distinguishing among the following policy instrument types:

1) Regulation

a) environmental permits (e.g. WBM)

b) standards (buildings and appliances)

2) Financial incentives

a) subsidies and fiscal facilities

b) taxes and special tariffs

3) Agreements

4) Market based instruments (WCS)

5) Communication/procurement/labels

6) Other

The numbers related to the existing policy mix should be included in the table according to a prioritization criterion of the influences by policy instruments and measures. For example, if regulation (1) comes before communication/procurement/labels (5) in the table, this means that regulation has been supposed to have stimulated the EES market for local administrations more than communication/procurement/labels.

EES financing typologies

1) EES provider financing,


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2) energy user/customer financing,

3) Third-party financing:

a) the EES provider borrows the financial resources necessary for project implementation

b) energy user/customer takes a loan from a finance institution backed by an energy savings guarantee agreement with the EES provider showing that the energy savings achieved will certainly cover the debt repayment.


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ANNEX II: Summary information to be reported in table 12

Information to be reported in the various fields of table 12 are summarized below:

EES provider: ESCO type (i.e. public ESCO, private ESCO, public-private joint venture, multinational company e.g. having or not heating and building control equipment retailer origin, independent specialist companies, ESCO of finance institutions) or energy company type (i.e. energy distributor, distribution system operator, retail energy sale company) or other company type or organisation responsible for EES implementation.

Sector(s) addressed : one or more of the sectors listed in tables 1,2,3,4

Technology/field of application: technology/field of application addressed by the EES considered (e.g. combined heat and power, HVAC, public lighting, energy efficient motors, etc.)

EES value chain stages considered: one or more of the EES value chain stages indexed in Annex I

EES financing typology: one or more of the EES financing typologies indexed in Annex I.

EES contracting typology: supply contracting, energy performance contracting or other contracting types (e.g. leasing, Build-Own-Operate-Transfer (BOOT) contracts, chauffage, etc.).

Existing policy instrument(s) stimulating EES imple mentation: one or more of the policy instruments indexed in Annex I. The numbers related to the existing policy mix should be possibly included in the table according to a prioritization criterion of the influences by policy instruments and measures. For example, if regulation (1) comes before communication/procurement/labels (5) in the table, this means that regulation has been supposed to have stimulated EES implementation more than communication/procurement/labels.

Barriers overcome: possibly existing barriers to EES implementation overcome by the good practice example addressed.


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6 References: Expert interviews carried out and further sources used

List of the persons interviewed

Name Company/Institute of origin

e-mail

Adriano Pallaro Banca Popolare Etica scpa, Uff. Sviluppo Strategico

[email protected]

Sergio Zabot Provincia di Milano [email protected]

Fernando Savorana

EES market expert [email protected]

Andrea Tomaselli Heat & Power [email protected]

Giuseppe Tomassetti

FIRE [email protected]


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References Papers and reports

AEEG, Seminari Tecnici, (ppt) “Risparmio Energetico e Certificati Bianchi”, 2005 AEEG, “Piano Strategico Triennale 2009-2011”, 2009 Beccarello, M., Clerici, A., et al., Task Force Efficienza Energetica, Commissione Energia di Confindustria, “Proposte per il Piano Nazionale di EFFICIENZA ENERGETICA”, Confindustria, ENEA, CESI 2006 Bernante, R., Capozza, A., Gallanti, M., Vanzan, R., Studi di supporto ad Enti Istituzionali nel campo dell’efficienza energetica. Attività svolte nel 2008, CESI Ricerca, February 2009.

Bertoldi, P., Rezessy, S., “Energy Service Companies in Europe - Status Report 2005” European Commission, DG JRC and Institute for Environment and Sustainability, Renewable Energies Unit

Bertoldi, P., Boza-Kiss, B., Rezessy, S., “Latest Development of Energy Service Companies across Europe - A European ESCO Update –“, 2007, European Commission, DG JRC and Institute for Environment and Sustainability, Renewable Energies Unit

Capozza, A., “IEA DSM Task X – Performance Contracting, Country Report Italy, Final”, Sept 2002

Capozza., A., Ciarniello, U.,Groppi, F., De Nigris, M.; Studio sul risparmio energetico possibile con tecnologie efficienti: potenziale teorico e barriere che ostano al suo spiegamento, azioni per una migliore diffusione, CESI Ricerca, December 2006 Capozza, A.,“Documento di sintesi del Progetto “Evoluzione della Domanda Elettrica e delle tecnologie per gli usi finali”, 2007”, CESI Ricerca, Febbraio 2008 Capozza, A., “Evoluzione della Domanda Elettrica e delle tecnologie per gli usi finali. Documento di sintesi del progetto (anno 2008)”, CESI Ricerca, Febbraio 2009 Capparelli, L., “La convenzione Consip servizio energia”, Consip Dic.2007 Chemelli, C., Moneta, D., “Partecipazione della domanda ai mercati dell'energia: valutazione di casi internazionali di successo e di strumenti idonei al superamento delle barriere esistenti”, CESI Ricerca, Dicembre 2006 Clerici, A., (ppt) “Efficienza energetica: situazione e prospettive in Italia”, Confindustria, Maggio 2008 Confindustria, Imprese X Innovazione, “L’Efficienza Energetica, L’Audit energetico e le ESCO” Toolkit Ambiente e Risparmio Energetico, 2006 Consorzio di bacino Padova 2, “ESCO, Energy Service Company”, Cosmi CHRONOS spa, Giugno 2006


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Databank (COMPETITORS report), “Energy Service Companies”, June 2007 Energy Charter Secretariat, “THIRD PARTY FINANCING, Achieving its potential”, 2003 Esco Italia spa, (ppt) “Esco and Energy Efficiency: an Opportunity for Economic Development”, January 2009 Farrell, D., Remes, J. K.,“How the world should invest in energy efficiency” The McKinsey Quartery, Economic Studies, July 2008 Federazione Italiana per l’Uso Razionale dell’Energia, (FIRE) Relazione Sintetica, Indagine sulle ESCO in Italia, 2008 Ferrari, C., “Le ESCO ed il finanziamento tramite terzi quale strumento di sviluppo dell’economia” proceedings of the Rinenergy annual conference, 2008 Gallanti, M., Grattieri, W., “Applicazione della Direttiva Europea sull'efficienza energetica ed i servizi energetici: contributo alla definizione di un Piano d’Azione Nazionale”, CESI Ricerca, Febbraio 2008 Geißler, M., Waldmann, A., Goldmann, R., “Market Development for Energy Services in the European Union”, Berliner Energieagentur GmbH, 23.08.2006 Gillingham, K., Newell, R., G., Palmer, K., “Energy Efficiency Economics and Policy”, National Bureau of Economic Research, June 2009 Glorioso, C., Lionetti, M., Presicce, F., “Energy Efficiency and Renewable Energy, Italy - National study”, Mediterranean and National Strategies for Sustainable Development Priority Field of Action 2: Energy and Climate Change, UNEP, MAP, Plan Bleu, March 2007 Golove, W.H., Eto, J.H., “Market Barriers to Energy Efficiency: A Critical Reappraisal of the Rationale for Public Policies to Promote Energy Efficiency”, Energy & Environment Division Lawrence Berkeley National Laboratory, March 1996 ICF International, National Association of Energy Services Companies “Introduction to Energy Performance Contracting”, prepared for: U.S. Environmental Protection Agency ENERGY STAR Buildings, October 2007 IEA, Worldwide Implementation Now, “ Boosting the economy with energy efficiency financing”, International Energy Agency, April 2009 Mathew, P., Kromer,J.,S., Sezgen, O., Meyers, S., “Actuarial pricing of energy efficiency projects: lessons foul and fair”, ed. Elsevier Ltd 2004 Mure, Odyssee, “Energy Efficiency Profile : Italy”, October 2008 Mure, Odyssee, “Energy Efficiency Profile : EU27”, January 2009

Ortis, A., Fanelli T., Relazione annuale sullo stato dei servizi e sulle attività svolte, AEEG, 2009


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Picchiolutto, S., “Il mercato dei servizi energetici: un approccio di sistema” FIRE, Gestione Energia, no. 4/2008 Poletti, C., “Le Prospettive del Mercato dei Certificati Verdi”, IEFE, GME, 2008 Poletti, C., D’Orazio, A., “The Italian Energy Policy: Changing Priorities”, IEFE Università Bocconi di Milano, Working Paper no. 16, November 2008 Redazione Gestione Energia, “I vantaggi e le difficoltà di diffusione del contratto di servizio energia Intervista a Renato Cremonesi”, Gestione Energia no. 2/2006 Renael, “Le società di servizi energetici. Energy Service Companies. E.S.Co”, EFFICIENCY, Quaderni di Efficienza Energetica, luglio 2002 Rezessy, S.,Bertoldi, P., Adnot, J., Dupont, M., “Energy Service Companies in Europe: assembling the puzzle. Preliminary analysis of the results to date from the first European ESCO database” 2005 Savorana, F., Fauri, M., Savorana, A., “E.S.C.O.”, Flaccovio Dario Editore, Palermo 2008 Savorana, F., Savorana, A., “PROGETTO “K Protocols”: Strumenti di finanziamento per la riduzione della CO2 a livello locale”, 2009 World Energy Council 2008, “Energy Efficiency Policies around the World: Review and Evaluation” Legal documents

• Decreto Legislativo 30 maggio 2008 , n. 115 sull’ Attuazione della direttiva 2006/32/CE relativa all'efficienza degli usi finali dell'energia e i servizi energetici e abrogazione della direttiva 93/76/CEE.

• European Council Directive 2006/32/EC on energy end-use efficiency and

energy services.

• Decreto Ministeriale 20 luglio 2004 (Dlgs 79/1999 - Efficienza energetica),sulla Nuova individuazione degli obiettivi quantitativi per l’incremento dell’efficienza energetica negli usi finali di energia, ai sensi dell’articolo 9, comma 1, del decreto legislativo 16 marzo 1999, n. 79.

• Decreti Ministeriali 24 aprile 2001. Efficienza e risparmio energetico negli usi

finali.

• Decreto del Presidente della Repubblica 28 dicembre 2000, n. 445, "Disposizioni legislative in materia di documentazione amministrativa. (Testo A).”

Websites www.fire-italia.com www.autorita.energia.it www.naesco.org www.assoesco.org/home/


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www.federesco.org www.agesi.it www.renael.net www.esteri.it www.sviluppoeconomico.gov.it www.parlamento.it www.enea.it www.cesiricerca.it www.rinenergy.it/ Other web information sources on the EES market in Europe and Italy http://www.ewc.polimi.it/dl.php?file=20040920DecretoGas.pdf; http://www.ewc.polimi.it/dl.php?file=20040920DecretoElettrico.pdf http://ec.europa.eu/energy/demand/legislation/doc/neeap/italy_en.pdf http://energia24club.it/articoli/0,1254,51_ART_101062,00.html?lw=51 http://www.munichre.com/en/press/press_releases/2009/2009_06_16_press_release.aspx http://www.apfn.org/apfn/enron.htm