N AT I O N A L W O R K S H O P,

B UILDING S ECTOR E NERGY E FFICIENCY

8 th D e c e m b e r 2 0 1 6 , E a s t i n H o t e l , S o l o k B a y a n I n d a h ,
Q u e e n s b a y, B a y a n L e p a s , P u l a u P i n a n g

ENERGY PERFORMANCE CONTRACTING AS A VIABLE

STRATEGY FOR BIG SCALE ENERGY EFFICIENCY
RETROFITTING PROJECTS IMPLEMENTATION
Ir H.P. Looi
C5 Manager Component 5
Building Sector Energy Efficiency Project
UNDP / JKR
 2 REALIZING EPC - SYNOPSIS

OVERVIEW OF ENERGY EFFICIENCY POTENTIALS

INTRODUCTION TO ENERGY SERVICE AND ESCO
HOW EPC WORKS?
POTENTIALS AREAS FOR EPC PROJECTS
SUCCESS STORIES
THE WAY FORWARD

8 December 2016
 3 Towards Energy Efficient Scenario :

Economically viable efficiency measures can halve

energy demand growth to 2035
Source: IEA

8 December 2016
 4 GLOBAL E.E. POTENTIAL

EE potential used by sector in the New Policies Scenario

2/3 of the economic potential to improve EE remains untapped in the

period to 2035
Source: IEA

8 December 2016
 5 SEA: Investment Potentials (US$MIL.)

Biggest potentials in the industrial

sector

The total market size = US$6.7 billion;

Industrial = US$2.9 billion(44%)
Commercial = US$3.7 billion(56%)

source: www.reexasia.com

8 December 2016
 6 ESCO industry by selected countries

Source: Lawrence Berkeley National Laboratory , National Association

of Energy Service Companies, USA September 2013

8 December 2016
 7 ESCO industry in the U.S.

Source: Lawrence Berkeley National Laboratory , National Association of Energy

Service Companies, USA September 2013
8 December 2016
 8 Existing E.E. Investment Programmes GoM
Delayed until today due
to unavailability of the
mechanism to pay ESCOs
EPC Program for 2011-present
government buildings PEMANDU-KeTTHA -Energy Commission

EPC Program for private

2014-present
sectors in Melaka MIGHT-MAESCO-Melaka Green Tech Corp.

Building Sector Energy Delayed until today due

2010-2016
Efficiency Project: EE to the lack of national
JKR(BSEEP Project Team)-UNDP level EE policy &
Demonstration Projects
regulatory framework

Energy auditing, retrofitting

2012-(2016-2017)
projects for demonstration
KeTTHA-ST-SEDA-MGTC
for government buildings

8 December 2016
9 GoM E.E. Programme at a Glance

TARGET 2020
8 December 2016
 (146) Local
? KPKT
Governments

8 December 2016
11

Minimum Energy Performance Standards (MEP) for

appliances

Conditional Grants for Energy Audits and

Management for Private and Public Sectors.

Other agenda (require input from other agencies):

Tariff remodeling EoT, removing subsidy etc
On line metering / Smart Meters

8 December 2016
 12

Conditional Grants for Energy Audits and

Management for Industry; Grants are conditional,
i.e. recipient must implement E.E. retrofit of
matching amount recommended in the subsequent
Audit or management report.
Major fiscal incentive to promote ESCO business and E.E. practice in
Buildings;

Grants allocated:
RM7million to Industry
RM3.8 million commercial buildings (private sector)
RM12.3 million (federal buildings)

Comment:

It is anticipated that this fiscal stimulus will fuel a small boom in the
Energy Service Industry from 2017
8 December 2016
 13 DEMAND SIDE MANAGEMENT

Gradual phasing out of Special Industrial Tariff

(SIT).
ETOU (enhanced time of use) Tariff Scheme.
Smart Metering

8 December 2016
 14 DEMAND SIDE MANAGEMENT

ETOU (enhanced time of use) Tariff Scheme.

ETOU is extension to EXISTING Time of Use TOU) tariff (C2 and E2).
Lower tariff at off peak and mid peak hours.

8 December 2016
15 DEMAND SIDE MANAGEMENT

Case Study of a
manufacturing Plant
shows the marginal
advantage of existing
TOU (E2) tariff

8 December 2016
 16 DEMAND SIDE MANAGEMENT

Monthly Charges

Monthly Charges
kWh consumption kWh consumption
The attractiveness of TOU (C2 and E2
tariffs) has DETERIORATED since 2006.
An expert study on C2 and E2
rationalisation should be commissioned
to enhance TOU DSM. Study should
include Macro Economic Impact on
Markets

Peak & Base load

approx. 2 GW ?

8 December 2016
 17 SMART METER

TNB rolling out smart meters for households and industry.

Smart meters are an essential first step in implementing flexible time of
use tariff.

Other Agencies with online metering agenda

Building Energy Web Monitoring by SEDA under RE programme..

ST consolidating building data under EMEER (Efficiency

Management of Electrical Energy Regulations).

JKR MySPATA data base of building energy (federal government

building)

8 December 2016
18 MYCREST ENERGY EFFICIENT DESIGN

All new Government Buildings

>RM 50million shall be certified to
MyCrest rating tool from 2017.
Carbon reduction and
environmental sustainability tool.
Carbon calculator
State government encouraged to
adopt MyCrest for their building
programme.

8 December 2016
8 December 2016
 20 TRADITIONAL VS INTEGRATED ENERGY SERVICE

Traditional Integrated Energy Services Model

Source: Government Property Group ,Integrated Energy Efficiency Retrofits and

Energy Performance Contracting ,Australia,2011
8 December 2016
 21 WHO/ WHAT IS AN ESCO

An Energy Service Company(ESCO)

Develop and implement turnkey, comprehensive EE projects
ESCOs offer performance-based contracts (i.e., contracts that tie the
compensation of the ESCO to the energy savings generated by the project)
as a significant part of their business

To ensure credentials, ESCOs must demonstrate the technical & managerial

competencies to design & implement projects involving multiple technologies :
Lighting
Motors & Drives
Heating & steam systems
HVAC Systems
Control Systems
Maximum Demand Controls
Building Envelope Improvements
at building/industrial facilities

8 December 2016
 22 SCOPE OF ESCO IN EPC PROJECT

Built-in scopes:
Project Funding & Financing Options
Engineering & Economic Feasibility
Studies
Project Design, Engineering &
Permitting
Project Construction Value added/additional scopes
Project Commissioning Consultancy & Advisory
Operation, spare parts & Regulatory Compliance
Maintenance Standards & Ratings
Performance measurements &
monitoring
Energy performance reporting

8 December 2016
8 December 2016
 24 OPTIONS FOR ENERGY SAVINGS MEASURES

MEASURES Management Directives

With LOW/ Implementation of EMS In-house
NO COST - to ensure sustainability initiatives
Minimal Cost of energy cost reduction
initiatives
Savings

MEASURES Priorities of budget - Expert

WITH HIGH core business/operations assistance &
COST Investment risks investment
Limited human resources from ESCO
Significant Cost & expertise
Savings

8 December 2016
 25 FUNDING OPTIONS
EXTERNAL & BY THIRD
EXTERNAL PARTIES

LOAN PUBLIC PRIVATE PARTNERSHIP

INTERNAL

CONVENTIONAL
GRANTS ENERGY PERFORMANCE
PROCUREMENT
CONTRACTING
Shared Saving Model

ENERGY
PERFORMANCE
CONTRACTING
ENERGY PERFORMANCE
Performance
CONTRACTING
Guarantee Model
Special Purpose Vehicle

8 December 2016
 26 WHAT IS AN ENERGY PERFORMANCE CONTRACT

EPC?
Energy Performance Contracting is when an ESCO is engaged to
improve the energy efficiency of a facility, with the guaranteed energy
savings paying for the capital investment required to implement
improvements

Implementation of energy saving projects is through direct investment by

the company or the energy service company (ESCO)

Zero " up front cost to the facilities owner that have been identified as
having great potential for energy cost savings

The returns from the investments will be used to pay back the ESCO only
from the actual energy savings achieved from the implementation of
energy conservation measures by ESCO according on performance based
contract with conditions agreed by both parties.

8 December 2016
 27 WHAT IS AN ENERGY PERFORMANCE CONTRACT

EPC?
Energy Performance Contracting is when an ESCO is engaged to
improve the energy efficiency of a facility, with the guaranteed energy
savings paying for the capital investment required to implement
improvements

Implementation of energy saving projects is through direct investment by

the company or the energy service company (ESCO)

Zero " up front cost to the facilities owner that have been identified as
having great potential for energy cost savings

The returns from the investments will be used to pay back the ESCO only
from the actual energy savings achieved from the implementation of
energy conservation measures by ESCO according on performance based
contract with conditions agreed by both parties.

8 December 2016
 28 WHO CAN USE THE EPC MECHANISM
Government Sector
For buildings that are owned or used by the government in the electricity bills paid by the
federal government, conditions applied are:
The ESCO must be registered with the Ministry of Finance under the code 222 801:
Green Technology Services where ESCO also required to be registered as registered
with the Energy Commission before by the Ministry of Finance in the government's e-
procurement system;
The agency shall ensure the implementation of EPC spending does not involve any
additional expense but it must provide savings to the government.
For government agencies under the authority of the state or that have autonomy in
their financial management as statutory bodies & some public institutions of higher
education, the concept of EPC is up to the procedures & regulations that must be
adhered to by the organization, respectively.
Up to the financial procedures adopted by the respective company
Payment procedure & conditions in the EPC contract documents will subject to
agreement between the company & the ESCO.
 29 WHO CAN USE THE EPC MECHANISM

For High Cost Energy Savings Measures

Standard purchase with internal funding

or
External funding:
Loans
Energy Performance Contracting(EPC)
Model with no upfront costs from the
facilities owner

8 December 2016
 30 EPC MECHANISM
Benefits: EPC Shared Saving Model vs. CONVENTIONAL Purchase
EPC-Shared Normal
Item
Saving Model Purchase
Technical Expertise ESCO ESCO
Implementation(design, installation, testing
ESCO ESCO
& commissioning)
Funding Source ESCO OWNER
At agreed % &
Sharing of returns % 100% to OWNER
conditions

Technical & Investment Risks ESCO OWNER

Energy Performance Maintenance &

ESCO OWNER
monitoring works and risks

8 December 2016
 31 OPTIONS FOR EPC MODEL

1. GUARANTEED 2. SHARED SAVING

SAVING

The loan goes on the clients The loan goes on ESCOs

balance sheet balance sheet

3. Through a Special Purpose

Vehicle(SPV) created specially for the
purpose

ALL ARE PERFORMANCE GUARANTEED!

 32 SHARED SAVINGS MODEL

Shared Saving Model

Implement
EPC Project

Develop EnMS & in-house capacity

Implement EnMS & sustain saving
building

Baseline
Detailed
Energy Audit Owners Share(10-30%) Energy
100% saving
ENERGY BILL

bill
ESCOs share(70-90%) enjoyed
saved
(Loan & interest, O&M, spare parts, by owner
insurance, profit & etc)

BEFORE EPC contract period After EPC contract period

YEAR

ZERO Upfront Cost to the owner

 33 SHARED SAVINGS MODEL

Guaranteed Saving Model

Project
Loan Fees

FACILITIES ESCO
BANK
OWNER

Repayment Project Design&

Implementation
 34 SHARED SAVINGS & GUARANTEED SAVING
GUARANTEED SAVING MODEL
Facilities owner takes out normal
loan
(will appear on balance sheet)
ESCO guarantees loan can be repaid
with savings
ESCO pays the difference if
minimum savings not achieved
Main advantage:
ESCO can undertake more projects
SHARED SAVING MODEL
Facilities owner does not take loan
(will not appear on balance sheet)
ESCO finances project: takes
performance & credit risk
Facilities owner pays higher % to
ESCO
Main advantage:
Independent from owners
borrowing capacity
35 THROUGH AN SPV
THE EPC PROCESS
 37 DIRECT APPOINTMENT OR OPEN TENDER

THE KEY DIFFERENCE FROM THE NORMAL PROJECT

TENDER PROCESS

To PREQUALIFY AND SELECT THE

CAPABLE ESCO/STRATEGIC PARTNER
and NOT TO OBTAIN AND COMPARE
THE BEST PRICE/DETAILED
INVESTMENT PROPOSALS from the
start
ENERGY PERFORMANCE
CONTRACTING PROCESS
 39 WORK FLOW EPC/ESCO

Payment
Select ESCO Sign EPC Contract
To ESCO

STAGE1: STAGE 2: STAGE 4:

STAGE 3:
PREPARATION DEVELOPMENT MEASUREMENT &
IMPLEMENTATION
VERIFICATION
 40 STAGE 1
Define & confirm commitment
CONFIRM THE NEED

CREATE VISION, BUILD INTERNAL BUY-IN TO EPC

PROCESS

GOAL SETTING
Clear goals to guide the process
Determine metrics for success
Clear investment criteria
Quantifiable
To make conversations with external service
providers(ESCOs) & internal financial decision makers
more smooth on what is considered as a successful
proposal
 41 STAGE 1

Define & confirm Criteria

KEY CRITERIA
Hurdle rate-minimum IRR/ROI required
SPP vs LCC
Other cash flow/OE reduction requirements
Desired outcomes-rating,certifications,awards & etc
Desired enhanced benefits in building functionality-improved comfort &
controlling capabilities
Quantity of energy to be reduced

Requirements that will be part of the project scope that guides the
ESCO to incorporate into the EPC contract document
Dont have to specify the total project cost-focus on financial &
environmental outputs
Let the ESCO to challenge themselves to meet the desired goals of
the owner.
 42 STAGE 1
Define & confirm Criteria
CONSIDER POTENTIAL FUNDING STRATEGIES
Self funding
Third party-loan/lease
ESCO financing as part of scope of services

SELECTION OF PROJECT SITE(S)

Higher annual energy costs that normal facilities with ESOs
Outdated system/equipment or near the end of their useful life
Relative consistent energy using patterns in several years(3-
5),stabilized occupancy
Access to several energy bills/records
Assets that are already planned for major capital
improvements
Larger facilities with complex systems
 43 STAGE 1
Define & confirm commitment & Criteria
RESPONSIBILITIES OF THE OWNER
Ensure the goal setting with decision makers occurs before the commencing of
project
Understand their criteria for approval and important metrics and outcomes

Assign project manager-oversee the EE project and as the key point

throughout the process

Create a project-dedicated cross functional team to enable timely decision

making(finance,legal, procurement,operations,engineering & other key
decision makers)

Compile key facilities information

Energy consumption-copies of monthly energy bills(1-3 years)
Drawings
List of major energy using system/equipment with basic energy information(rated
power,operating hours,types of control & etc)
Existing and planned ESMs
 44 STAGE 2

Select ESCO & Assess Opportunity

Ability to secure
Experiences in EPC financing & ensure
Financial sustainable
Projects /Track Records
Strengths operations
in energy services

Management
Technical Competency
capacity in
& Expertise
energy services

TO CREATE A STRATEGIC PARTNERSHIP

ESCO
TO BE CHOSEN TO BE INVOLVED IN THE PROJECT DEVELOPMENT STAGE
 45 ESCO SELECTION PROCESS

Release RFP/RFQ

Review responses

Interview shortlisted ESCOos

Select team & sign letter of intent with the

ESCO
 46 INFORMATION IN RFP /RFQ
Key information
To assemble the
Project goals & investment criteria
ESCO team
Site information(summary)
Procurement process & timeline
To prepare for Project team requirements-competency,
the selection skills & organizational structure
process Expected response contents & format
Evaluation process & criteria
Project development process & expected
timeline

Appointment to implement EPC projects

Approval to conduct detailed energy audit at ESCOs own costs
Access to information and selected facilities
Commitment to sign EPC contract subject to the findings of detailed
energy audit by the ESCO
 47 DETERMINE APPOINTMENT OF ESCO

THE APPOINTMENT OF ESCO MEANS A

COMMITMENT TO IMPLEMENT THE PROJECT

TO CONFIRM THE COMMITMENT OF THE FUND

SOURCING METHOD & FUNDING PARTY
Owner(internal/external); or
ESCO

WALK-AWAY FEE IF THE OWNER/ESCO UNABLE

TO SECURE THE FUND FOR PROJECT
IMPLEMENTATION
 CONDUCT INVESTMENT GRADE
48
AUDIT
With agreed document to implement findings if
feasible technically & financially
To follow owner-defined investment criteria for
energy saving measure recommendations
Site constraints
Expected deliverables
Ownership of the work
Owner & ESCO commitment in the audit process
Detailed audit schedule
Details of walk-away fee
 49 DELIVERABLES OF INVESTMENT GRADE
ENERGY AUDIT (IGA)
Transparent energy baseline Detailed investment proposals
data & analysis Minimum guaranteed energy
Total energy saving potentials cost savings
with detailed breakdown of
minimum guaranteed ROI/IRR
performance and cost for each
energy saving measure
identified & proposed Options of funding(Normal
Detailed investment costs to procurement/EPC)
cover
Equipment & installation EPC Shared saving
O&M sharing % by each party
Spare parts Contract period
M&V Plan Draft EPC contract
SIGN EPC
CONTRACT
 51 KEY ELEMENTS IN EPC DOCUMENTS

What is guaranteed?
The minimum amount of savings expected to be achieved
The method, report formatting and formula for calculating shared
savings will be paid to the ESCO
Conditions to be applied if savings achieved are less than guaranteed by
the ESCO

The cost savings measurement with significant changes of

operations at the facilities
The responsibilities of building owners and the ESCO
throughout the contract period
Maintenance, use & modification/ removal of the equipment
that was installed by the ESCO by the facilities owner
If the equipment installed by the ESCO is lost or damaged
Guarantee of losses and liabilities by ESCO to the facilities
owner
 52 STAGE 3 - IMPLEMENTATION

EXECUTE THE EPC CONTRACT

IMPLEMENT FINAL PROJECT SCOPES

COMMISSION ALL INSTALLED & IMPROVED

EQUIPMENT FOR IMPACTED SYSTEM

STAFF TRAINING & UPDATING OF O&M

DOCUMENTS
 53 STAGE 3 - IMPLEMENTATION

IMPLEMENT
MONITOR POST- PREVENTIVE
RETROFIT MAINTENANCE PLAN
PERFORMANCE & TAKE NECESSARY
CORRECTIVE ACTION
 54 MEASUREMENT & VERIFICATION

Measurement & Verification of Actual Saving Achieved

Energy saving measurement for verification

baseline data/performance indicator
measuring type & point

Require energy metering

The long term success of energy management projects is often hampered
by the inability of the project partners to agree on an accurate, successful
M&V plan... M&V protocol discusses procedures that, when
implemented, help buyers, sellers and financiers of energy projects to
agree on an M&V plan and quantify savings from energy conservation
measure (ECM) projects. - (IPMVP, Volume I, March 2002)
 55 MEASUREMENT & VERIFICATION

Factors should be considered for M&V in EPC contract to

reduce dispute

Commitment from Client

Factors Affecting Savings Performance
Evaluating Savings Uncertainty
Minimum Operating Conditions
Energy Prices
Verification by a Third Party
Baseline Adjustments (Non-Routine)
Balancing Uncertainty and Cost
 56 SUMMARY OF WORK FLOW
SUMMARY OF A Workable EPC Business Process Flow :
DIRECT APPOINTMENT/OPEN TENDER
The owner Prepare EPC
Issue RFP to
confirmed basic info, Prequalification
qualified
the EPC Objectives & Of ESCOs
ESCOs
needs Targets

ESCO conduct
EPC detailed energy Evaluate
Contractual audit & present Appoint the Preliminary
Terms detailed EPC ESCO Proposals from
Negotiation investment
proposal ESCOs

Measurement
Monthly
& Verification
Sign EPC Implement reporting &
of Actual
Contract EPC Project payment to
Saving
ESCO
Achieved
 57 KEY FEATURES & SUCCESS IN EPC

Energy Cost savings based on ACTUAL

& MEASURED data-before & after CAPABLE ESCO

COMPREHENSIVE EPC Contract

Document UNDERSTANDING of the how EPC
works & it long term benefits by
facilities owners
TRUST & TRANPARENCY in
strategic partnership to reduce
business costs

Commitment to get
FASTER results!
WHERE AND HOW TO SAVE?

Potential energy saving

opportunities from THE
detailed ENERGY audit
 59 WHERE TO INVEST ?

SYSTEM/ NEW & ENERGY EFFICIENT

EQUIPMENT DESIGNS & OPERATIONAL
OPTIMIZATION FEATURES

RETROFITTING FOR
RENEWABLE ENERGY
ENERGY EFFICIENT
OPTIONS
TECHNOLOGIES
 60 WHERE TO INVEST ?
Where To Save Energy?...Manufacturing Facilities

Source: Energy Conservation

Centre of Japan, 2011
 61 WHERE TO INVEST ?
Where To Save Energy ?... Air Conditioning Systems

Pumps (25% - 35%)

Chiller (20% - 25%)
AHU/FCU (25% - 35%)
Cooling Tower(15% - 20%
 62 WHERE TO INVEST ?
Potential EPC Projects for Energy Efficient Lighting
Technologies

Energy Saving Micro Ballast

and HP Fluorescent T8-28 watts LED Fluorescent Tubes LED Down Light

High Performance LED Street

LED Ceiling Light Light LED Spot/Flood Light

Savings at 40-60% from lighting system

 63 WHERE TO INVEST ?
Example of energy saving solutions for ACMV optimization & controls for
pumps at building facilities
 64 WHERE TO INVEST ?
Examples of areas for energy conservation measures in stages
implementation
Stage 3 : Maximum
Demand Monitoring &
Control

Stage 2: Retrofitting for

Improving Chiller
Performance

Stage 1: Electricity
Incoming Supply
Optimization
 65 CASE STUDY WAREHOUSE
MALAYSIAS EPC CASE STUDY : WAREHOUSE FACILITIES

Application Areas:
- Fluorescent Lamps
- High bay Lighting - HID
After Installation:
20,000 pcs x 26W/1000

Before Installation:
20,000 pcs x 45W/1000
Total annual Saving = 42.2%
= 3,283,200 kWh,
= RM 920,000
Source: MAESCO
member
 INTEGRATED SHOPPING
66
COMPLEX
CASE STUDY : INTEGRATED SHOPPING COMPLEX FACILITIES

Areas of Conservation Implementation:

1) Transformers (MSB)
2) Cooling System Chillers, C/Tower, AHUs, CHW & CDW Pumps
3) Lighting System Internal, External & Parking
4) Peak Demand Control
Total Actual Saving Achieved
= RM 1,495,000/year

Total Proposed Saving

Source: MAESCO member = RM 905,000/year
 67 EXAMPLES
EXAMPLES OF INVESTMENT S IN EPC Projects For
Buildings In Malaysia
NO. ENERGY USING SYSTEM TOTAL TOTAL
& EQUIPMENT INVESTMENT ENERGY
TYPE OF BUILDING-LOCATION IMPROVED (RM mil.) COST SAVING
(RM/YEAR)
1 Building facilities Kuala Lumpur Transformers 2.5 375,000
2 Building facilities - Selangor Chillers 6.4 906,000
3 Building facilities Kuala Lumpur Chilled Water Pumps 2.2 308,000
4 Building facilities -Melaka Condenser Water 2.5 354,000
5 Building facilities - Melaka Pumps 6.3 882,000
6 Building facilities - Selangor Air Handling Units 2.4 332,000
7 Building facilities Kuala Lumpur Maximum Demand 2.2 325,000
Controls with
8 Building facilities - Johor 5.9 830,000
computerized monitoring
9 Building facilities - Perak 5.6 802,000
control system
10 Building facilities Negeri Sembilan External & Internal 2.3 323,000
11 Building facilities - Selangor lighting systems 5.0 711,000
 68 EXAMPLES INDUSTRIAL
No. Client Scope of energy saving measures Investment Cost Saving
(RM) Achieved/Year
(RM)
1 A Co Ltd., (China) Cooling system, pumps and fans completed 26,200,00 4,200,000
with monitoring and control system
2 B Co Ltd., (China) Boiler steam conservation completed with 20,600,00 3,230,000
monitoring and control system
3 C1 Thailand Chilled water system, pumps and fans 5,100,000 770,000
4 C2 Thailand Oven waste heat recovery completed with 5,800,000 880,000
Chilled water supply system
5 C3 Thailand Cooling system, pumps and fans 4,980,000 710,000
6 C4 Thailand Cooling system, pumps and fans 4,620,000 683,000
7 D1 (Malaysia) - Shah Waste water recycling conservation 40,500,000 6,800,000
Alam program complete with monitoring and
control system
8 D2 (Malaysia) - Shah Chillers, Cooling Towers, pumps and fans 35,800,000 6,350,000
Alam completed with monitoring and control
system
9 D3 (Malaysia) - Boiler waste heat recovery system 15,300,000 2,230,000
Shah Alam completed with monitoring system
10 F Sdn Bhd -Pasir Chillers, Air-Compressor, pumps and fans 16,200,000 2,620,000
Gudang
 69 CHALLENGES IN EPC
Energy Baseline Facility owner participate in establishing the
Development energy baseline

The facility owner agree on the definitions and

methodology for making any future
Energy Baseline Adjustment
adjustments to the energy baseline and should
be A part of the contract.

The allowance of operational savings is

Operational Savings
generally discouraged.

Stipulated Savings Should be avoided/used minimally.

ESCOs inflated the interest rate of funds

borrowed for additional profits.
Excessive Finance Charges
Facility owners may check/arrange their own
financing at lower rates.
 70 CHALLENGES IN EPC
Some ESCOs have required that the
Required Maintenance
preventive maintenance on facilities also be
Agreements outsourced to that ESCO

Lack of Local Facilities

off-site control must be avoided
Control

Terms of Savings
Savings should be calculated on an annual
Reconciliation Versus
basis and stand alone on that basis
Budget Cycle

the use of a project manager or a third party

Quality Control
verifier by the client is highly recommended

Owners request Transparency in the overall costs

unreasonable amount of involved(technologies, )&M, interest rates,
shared saving % IRR, profits and etc.)
 71 CHALLENGES IN EPC
Recommended Support Measures for EPC in
Malaysia
ACTUAL ENERGY
FINANCING TECHNICAL FISCAL
PERFORMANCE
ASSESSMENT INCENTIVES
M&V

Sustainable Competent & Competent &

Funding Independent Independent
Sources Parties Parties

Revolving Fund
/Low Interest Transparency Recognition Of
Loans In Assessment M&V Services
Criteria
Assessment
Criteria For
Energy
Services/Energ GOVERNMENT AGENCIES,FINANCIAL
y Efficiency INSTITUTIONS, PROFESSIONAL BODIES
Solutions
SUCCESS STORIES OF
E P C P R O G R A M
I M P L E M E N TAT I O N
 73 UNITED STATES
Federal, State, and local governments in the US invested
over $21 billion in EPC since 1997
The US Federal Governments 2009 economic stimulus
package included an additional $3.1 billion for efficiency in
existing federal government buildings
Federal and State governments have passed specific laws to
facilitate EPC and accept up to 15-20 year payback periods.
Research in the US indicated that EPCs have delivered
general benefit to cost ratios of 1.6 to 1, with higher 2.1 to
1 ratios for EPCs in health facilities.
 74
European Platform for the Promotion of EPC
Development of manuals on
additional models and support-EPC +
White Certification
Quality Standards
Comprehensive Refurbishment
& link to Facility Management
Norms /Certification
Financing
Intensive dialogue with market
actors - Building owners - Financial
sector - ESCOs
Capacity building & Increased
awareness, know-how & exchange
Over 100 events organised and
attended, 2,000 participants with
about 60 are new EPC experts
Pilot projects
Over 360 buildings screened
30 more concrete projects received
further support
17 resulted in concrete EPC
projects
About 1 million square meters
Energy cost baseline of almost 10
million Euros/year
Estimated energy savings between
10% and over 25%
 75 Australias Strategy

Source: Government Property Group ,Integrated Energy Efficiency

Retrofits and Energy Performance Contracting ,Australia,2011
 76 AUSTRALIA -Queensland Government

The Strategic Energy Efficiency Policy for Queensland

Government Buildings - to reduce their energy consumption
by 5 % below 2005-06 levels by 2010, and 20 % by 2015.
Shares some key features with the Victorian program - the
use of EPC and facilitation by a single department, the
Department of Public Works.
The Department of Public Works has so far invested over $20
million in improving the energy efficiency of 25 of the sites
that it owns
Has reduced its energy use in those buildings by 18
megawatt hours per year
77 ESCO Fund in Thailand
 78 Barriers to ESCOs in Developing Countries

Most independent ESCOs have a small capital base

New Concept among Fis

Lack of expertise among FIs

Smaller compare to other investment

Immaturity of the EE market in developing countries economic

growth/profits only form spending/sales
 79 THE WAY FORWARD.

The potentials in Malaysia is still relatively UNTAPPED

EPC is a proven EFFECTIVE model for faster ENERGY EFFICIENCY implementation
for MORE ENERGY EFFICIENT facilities-implementation process must match the
ESCOs business model
ESCOs must have/develop competency & capability to ensure successful EPC
projects implementation

The commitment and mandates to government agencies to get faster energy

saving results!
- with timeline & support measures

More successful EPC projects are required to attract more attention of building
owners & banks/investors
 THANK YOU!

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