Market Study - Smart Heat-1

Soletek OÜ
Utilizing the ESCO business

models
Market study report
Invent Baltics OÜ
1/8/2013
ABBREVIATIONS -4-
EXECUTIVE SUMMARY -5-
ENERGY EFFICIENCY MARKET -7-
ESCO BUSINESS MODELS -9-
ENERGY SUPPLY CONTRACTING (ESC) - 10 -

ENERGY PERFORMANCE CONTRACTING (EPC) - 11 -
CHAUFFAGE - 12 -
INTEGRATED ENERGY CONTRACTING (IEC) - 12 -
FACILITY MANAGEMENT (FM) - 13 -
ESCO MARKETS IN EUROPE - 13 -
SWEDEN - 14 -
ENERGY EFFICIENCY SERVICES MARKET - 14 -

BUSINESS MODELS IN SWEDEN - 14 -
GERMANY - 17 -

BUSINESS MODELS IN GERMANY - 18 -
DENMARK - 21 -

BUSINESS MODELS IN DENMARK - 23 -
POLAND - 25 -

BUSINESS MODELS IN POLAND - 26 -
FINLAND - 28 -

BUSINESS MODELS IN FINLAND - 29 -
NORWAY - 31 -

BUSINESS MODELS IN NORWAY - 31 -
- 1 - | Page
IDENTIFICATION AND ANALYSIS OF ICT-BASED HEATING SOLUTIONS - 32 -
COMPANIES OFFERING SOFTWARE AND HARDWARE SOLUTIONS - 32 -

SCHNEIDER ELECTRIC - 32 -
HONEYWELL - 34 -
ENERNOC - 35 -
JOHNSON CONTROLS - 37 -
SIEMENS - 38 -
ICT-BASED CASE STUDIES - 40 -
HOMES PROJECT - 40 -
E3SOHO PROJECT - 42 -
ESESH PROJECT - 45 -
BECA PROJECT - 46 -
SHOWE-IT PROJECT - 46 -
ICE-WISH PROJECT - 47 -
BUSINESS MODEL CASE STUDIES - 48 -
ENERGY PERFORMANCE CONTRACTING CASE STUDIES - 48 -

MUNICIPALITY OF MIDDELFART - 48 -
PANKOW DISTRICT - 49 -
NYKÖPING COMMUNITY CASE - 50 -
ENERGY SAVING IN MUNICIPAL BUILDINGS IN SMALL COMMUNITIES IN RURAL DISTRICTS (ENSAMB) CASE - 50 -
ENERGY SUPPLY CONTRACTING CASE STUDIES - 51 -
MUNICIPALITY OF HALSNASS - 51 -
HOUSING DEVELOPMENT LINDENHOF 2 - 52 -
HOUSING DEVELOPMENT RATHAUSSTRAßE - 52 -
CHAUFFAGE CASE STUDIES - 53 -
VILLENEUVE HEATING PLANT - 53 -
CITY OF VARNA - 54 -
INTEGRATED ENERGY CONTRACTING - 55 -
SCHLOSS RETZHOF - 55 -
ANALYSIS OF ESTONIAN EXTERNAL ENVIRONMENT FOR THE IMPLEMENTATION OF THE DIFFERENT TYPES
OF EPCS - 57 -
ESTONIAN ENERGY EFFICIENCY MARKET – MARKET SIZE, MARKET SEGMENTATION, POLICY INSTRUMENTS, EPC CONTRACTS - 57 -
POWER GENERATION POLICIES - THE POLICY BACKGROUND TO ENERGY EFFICIENCY - 58 -
ENERGY EFFICIENCY MEASURES - 60 -
ENERGY SERVICE MARKET IN ESTONIA - 62 -
IDENTIFYING SUITABLE BUSINESS MODELS FOR THE ESTONIAN MARKET - 63 -
ANNEX 1. DEVELOPMENTS IN NATIONAL ESCO MARKETS IN EUROPE: 2007-2010 - 65 -
ANNEX 2. MARKET SEGMENTS IN WHICH THE BUSINESS MODELS WORK - 68 -
- 2 - | Page
ANNEX 3. ESCO MARKETS IN HUNGARY, SLOVAKIA, CZECH REPUBLIC, CROATIA, POLAND AND ROMANIA - 69
-
ANNEX 4. THE HEAT THRESHOLD PRICES FOR CONSUMERS APPROVED BY THE COMPETITION AUTHORITY
(JULY 2013) - 72 -
- 3 - | Page
Abbreviations
DH District Heating
EE Energy efficiency
EES Energy efficiency services
EPC Energy performance contracting
ESC Energy Supply Contracting
ESCO Energy Service Company
FM Facility Management
GDP Gross domestic product
GHG Greenhouse gas
HVAC Heating, ventilation, and air conditioning
IEC Integrated Energy Contracting
MoEAC Ministry of Economic Affairs and Communications
OECD Organisation for Economic Co-operation and Development
PJ Peta joules
PV Solar photovoltaic
TPF Third party financing
TWh Terawatt-hours
- 4 - | Page
Executive summary
The following market study was conducted during July 2013, with the objective to identify ICT based
heating solutions implemented by Energy Service Companies (ESCOs). Furthermore, external
environment analysis of Estonian energy efficiency market was conducted in order to implement different
types of Energy Performance Contracts (EPCs).
The aim of the market analysis was to:
 identify the most common ESCO business models and their application in primary target markets;
 identify and analyse ICT based heating solutions implemented by ESCOs;
 external environment analysis of Estonian energy efficiency market;
 analyse Estonian energy efficiency market (policy instruments, EPC contracts in Estonia etc);
 identify suitable business models for Estonian market.
The market analysis was conducted as following:
1. Different ESCO business models were identified and described.
2. Primary target markets were found: the countries were selected based either on location and
climate conditions similar to Estonia (Nordic countries), long experience and size of the market
(Germany) and based on the historical background (former Soviet Union), usage of district
heating (DH) and size of GDP (Poland).
3. ESCO business models in target markets were identified and described in more detail.
4. ICT based heating solutions were identified and described.
5. Different business model case studies were identified and described.
6. Analysis of Estonian external environment for the implementation of the different types of EPCs
were analyzed.
7. Estonian energy efficiency market – market size, market segmentation, policy instruments, EPC
contracts - was described.
In the given study, 5 main ESCO business models were described in more detail:
 ESC (energy supply contracting) is a supply side energy efficiency measure. In most cases, ESC is
investment free for the customer and the contracts typically run for 10-15 years.
 EPC is a performance-based procurement method and financial mechanism for building renewal,
whereby utility bill savings that result from the installation of new building systems (reducing
energy use) pay for the cost of the building renewal project.
 Chauffage is a contract form that revolves around providing a function. The function can be
related to temperature, lighting level, air quality etc. The most common function is to provide a
certain (or relative) temperature in a facility, “conditioned space”.
 IEC (integrated energy contracting) is a business model that combines elements from both ESC
and EPC. The aim of IEC is to create an integrated model that involves both supply side and
demand side energy efficiency (EE) measures.
 FM (facility management) is a way of managing facilities by incorporating various facility related
services into an integrated solution. FM works with a wide area of services such as: catering,
security, cleaning, mailroom etc. FM companies can also choose to incorporate energy related
services into their offerings.
In order to identify the appropriate ESCO model for Estonian municipalities/companies, the selection of
cases and countries were based on different aspects:
• Climate - Nordic countries were included because of the climatical similarities.
• The spread of district heating - DH is mainly found in northern, central and eastern European
countries. In cities like Copenhagen, Helsinki, Warsaw, Vilnius, Riga as much as 90% of
residential heat demands are satisfied by DH.
• Size of the market – Germany is on of the biggest markets in the Europe
Based on the market intelligence, several assumptions can be made in this regard:
- 5 - | Page
• ESC is not preferred. ESC is not a well-known concept in Nordic countries - an important
reason for this is the well built-out DH system. According to Estonian Competition Authority,
the prevalence of DH in Estonia is 70%1.
• EPC is well suited for large scale projects, especially in the public sector. In case of the EPC
contract, ESCO has to make the decision, whether to make a guaranteed savings or a shared
savings contract:
o In case of the guaranteed savings model, the customer will finance the project (either
through own funds or through loans) and the ESCO will in return guarantee a minimum
energy savings level (percentage). This can be more suitable for a starting ESCO, who has
not enough capital/assets to finance the investment or get a bank loan with favourable
terms and conditions. For example in Sweden, the vast majority of EPC contracts are
done in the public sector and customers in this sector generally can get more beneficial
financing on their own than any ESCO can provide.
o With shared savings, the ESCO finances the project and the savings are then split between
the customer and ESCO according to a predetermined split. In this case, ESCO has more
negotiation power and can define better terms for himself. However, as the EPC is a
complex contract form that is not suited for smaller projects because of the high
transaction costs and Estonian customers do not have a high awareness about the EPC
today; it might be hard to “sell” the service.
• IEC is a business model that can be said to expand the ESC model to include demand side
measures. As ESC is not a well-known concept in Nordic countries and not used in countries with
a strong DH prevalence, IEC might also be not suitable for Estonian market as well.
• Chauffage or comfort contracting is a contract form that revolves around providing a function.
The Chauffage model suits companies who already deliver DH and electricity as their main
business area. Those companies can use their own DH for the energy supply. The Chauffage
business model benefits from the large commercial properties building space.
There are currently 2 companies, who have organized projects similar to ESCOs in Estonia. This might
be a sign that there are barriers to the market entry:
• Society is not ready to accept ESCO services because
o There is general lack of awareness in Estonia of the ESCO concept. For example, when
first ESCOs were started in Latvia, the companies (mostly lighting companies) found it
difficult to convince clients because of what was perceived to be clients’ general lack of
awareness concerning ESCOs. This is one issue, which also the Estonian ESCOs must
overcome.
o There has been little experience with the operation of an ESCO in Estonia.
• There are no existing models for performance contracting.
• The Estonian ESCOs have to face the financial risk of the initial investment.
Based on the information gathered, the most suitable business model for Estonian market would
be Energy Performance Contracting. EPC is well suited for countries with a high DH prevalence.
ESCO can variate, wheather to choose the guaranteed savings or shared savings model.
According to the District Heating Act Section 9, Article 4, the heat price set by the heating company can
not exceed the Competition Authority approved limit. The lowest DH price in Estonia is in Narva, where
the MWh price is 32.98 euros. The highest price is in Rummu network area, where the MWh price is as
high as 108.89 euros. (Annex 4) The average price for DH in Estonia is 87.24 €/MWh and the upper
quartile is 95.27 €/MWh. Therefore it can be discussed that the ESCO potential would be the
biggest in the areas, where the €/MWh is above average or in the upper quartile.
1 http://www.mkm.ee/public/Soojusmajanduse_analuus_MKM_2013.pdf
- 6 - | Page
Energy efficiency market
Developed markets in North America and Western Europe have highly competitive energy efficiency
markets. Energy Service Companies (ESCO) revenues measure in the billions of dollars, bolstered by
public sector clients with long energy performance contracts. However, the fastest growing markets are
outside of these regions. The market for energy efficiency services and equipment is on the rise as
national governments look to reduce energy consumption by improving the efficiency of the building
stock. With buildings being one of the largest sources of energy consumption, the opportunity to improve
efficiency is significant, ranging from high-efficiency HVAC systems to the utilisation of energy-efficient
lighting technologies to business models such as EPC as employed by ESCOs around the world 2.
Furthermore, the rising energy consumption of the housing sector, which has an impact on nearly every
aspect of a country's economy, is driving diverse and increasing interest in residential energy efficiency for
both new homes and retrofits of existing ones.
Today, the global market for energy efficiency stands at €51.8 ($67.8) billon, encompassing ESCO
revenues, sales of energy efficient HVAC equipment, and sales of energy efficient lighting systems. By
2017, the market will grow to €78.7 ($103.4) billion at a compound annual growth rate of 7%. Growth
will occur in all regions and for all technology types except energy efficient lighting, a market in which
total market size will contract with the advent of increased levels of LED penetration and reduced
demand for lamp replacements.3
Globally, more than half of the energy consumption in buildings - which is expected to rise from 31,983
TWh to 51,253 TWh by 2050, according to the International Energy Agency (IEA) - comes from
residential buildings. The dynamics of the energy-efficient housing market vary widely across regions and
countries. It has yet to be determined whether or not energy efficient homes - and all the products and
services used in them - can be a saviour for sluggish housing markets in developed economies, or provide
a demand-side tool to help control rising electricity demand.4 Going green has become popular, not only
among regulators and governments, but also in the consumer world. People around the globe are
becoming increasingly aware of their environment and personal health and also want to do their part to
lower GHG emissions and reduce the use of natural resources. Error! Reference source not found.15
utlines an ESCO setup and the parties involved. An ESCO receives payment in return for a project and
guarantee to the customer.
The ESCO model has generated a
number of new companies
throughout the energy supply value
chain specialized in reducing the
need for energy in buildings and
production lines. (Error!
eference source not found.) The
size, structure, and composition of
energy efficiency markets vary
from one country or region to
another. The core of most energy
efficient markets is formed by
ESCOs, engaging in long-term
energy efficiency contracts with
building owners. However, a
holistic consideration of the global
energy efficiency market includes
Figure 1. ESCO setup
2 http://www.companiesandmarkets.com/News/Environmental/Global-energy-efficiency-market-driven-by-governments-looking-to-
reduce-energy-consumption/NI6296
3 http://www.navigantresearch.com/wp-assets/uploads/2011/11/EEBG-11-Executive-Summary.pdf
4 http://www.companiesandmarkets.com/News/Environmental/Global-energy-efficiency-market-driven-by-governments-looking-to-
reduce-energy-consumption/NI6296
5 http://www.danishwaterforum.dk/activities/Water_and_green_growth/greenpaper_fora_211010_green_business%20models.pdf
- 7 - | Page
sales of energy efficient HVAC equipment and lighting systems beyond the ESCO model.
In Europe, the European Commission estimates that the market for ESCOs can develop to a volume in
the range of EUR 5-10 billion per year within a short-term perspective in the EU. In Germany alone,
which is considered the most mature market, there are about 500 ESCOs with an annual turnover of
EUR 3 billion.6 This gives reasons to believe that there is also an unrealised ESCO potential in the Nordic
countries where ESCOs in general are not widespread.
Table 1. Economic and environmental benefits in ESCO7
Economic benefits Environmental benefits
 Energy costs savings due to reduced need for  Energy and waste reduction, use of renewables
energy and conversion of energy sources; and replacement of oil and gas;
 Reduction of maintenance costs and  Better comfort from improved indoor climate;
prolonged product lifetime;
 Faster introduction of environmental friendly
 Indoor climate is often improved leading to technologies;
less sick leaves and improved conditions for
focusing and concentrating;  Change of attitude towards a more sustainable
behavior.
 Spin-off innovations and new technical
solutions invented along the implementation;
 CSR value and branding for both customers
and suppliers;
 Educational/practical training leading to
increased motivation and inspiration for
staff/users.
There is a clear connection between carrying out an ESCO project and generating environmental
improvements. Operating residential and commercial buildings account for more than 15% of all
greenhouse gas emissions globally, according to the World Resource Institute8. Most of the existing
buildings are old and poorly insulated with in-efficient heating, energy and other supply installations. Thus
the ESCO business model provides a significant potential for a reduction of energy and greenhouse gas
emissions in the Nordic countries where fossil energy is used for heating etc. According to the Green
business models in the Nordic Region report by FORA and COWI, the ESCO business model generates
multiple benefits for the supplier, the customer, the environment and the end user of the buildings. The
most important financial and environmental benefit is lower energy cost for the customer through a
reduced need for energy9.
The European Union target to save 20% of the energy usage by 2020 requires large investments in energy
efficiency over the next couple of years. Due to the fact that ESCOs are important agents to promote
energy efficiency improvements and renewable energy sources European Commission and the Member
States of the European Union have promoted a number of policy initiatives to foster the Energy Services
industry in European countries. While the directives have been adopted mostly in national law, the energy
service market in the European countries suffers strongly from a lack of enforcement and different levels
of support offered to ESCOs by national and regional energy authorities. Further reasons for different
market development in European countries are local market structures and rules and variation in the
definitions, roles and activities of ESCOs10.
The leading ESCO countries in Europe by market penetration are Germany, United Kingdom, France
and Spain. In some countries like Greece and Ireland only a few companies have recently started to
6 http://ideas.repec.org/a/eee/enepol/v34y2006i14p1818-1832.html
8 http://www.wri.org
10 http://www.trendresearch.de/studie.php?s=303
- 8 - | Page
operate. Some other countries have also seen a spectacular increase (yet starting on a rather low level) in
ESCO activity in the last few years. A good example in this respect is Sweden. A focused and
comprehensive strategy that was designed for the country-specific circumstances has led to a significant
market rise. Also, Czech Republic and Hungary have significantly strengthened the ESCO industry11.
Annex 1 gives and overview of the developments in national ESCO markets in Europe between 2007 and
2010.
ESCO business models
The ESCOs utilize different business models; however the underlying principle is to carry out energy
optimization of buildings or production facilities financed by the savings generated by the optimization
Figure 2. Overall concept of ESCO’s business model

process. In its purest form the customer has no initial investment, but only a pre-set monthly payment to
the ESCO. (Figure 2) The payment model can be
constructed so that costs correspond to actual savings
at any given point in time of the project, or so that the
customer gets a share of the savings from day one.
In the Nordic countries, the model is mainly targeting
public buildings, but it is also used for large energy
corporations with substantial energy consumption.
(Annex 2) The model can also be found in relation to
commercial, agricultural, and in some countries
residential sectors.12
In principle, the ESCO company develops, installs,
finances (assumes the financial risk) and maintains
performance-based energy optimization of heating,
energy or other supply projects of facilities owned by
customers (e.g. a school). The ESCO issues a
guarantee up front on the amount of energy savings
that the renovation will result in.
This guarantee is a cornerstone in gearing the
economy in the project. The starting point is to
balance savings with expenses over a certain period of
time, e.g. 10 years for buildings. Thus the ESCO is
paid according to the extent of realised savings on Figure 3. Energy service value chain, business
models, typical products and measures
11 http://www.trendresearch.de/studie.php?s=303
12 http://www.eu-esco.org/fileadmin/euesco_daten/pdfs/101006_euesco_ContractingFlyer_A4_final_low.pdf
- 9 - | Page
heat, energy or water. Because of the guarantee, the customer gets a project with a transparent and clear
financial profile for the full project period. It is often seen that a public customer handles the actual
financing themselves, but there will still be a savings guarantee, which means that the ESCO maintains the
primary part of the risk.
As a consequence of the financial risk that the ESCOs carry, they are almost always major companies with
a solid financial structure and capacity. Many of them are part of a corporation that produces key
components of the renovation project. The renovation project results in less need for energy and thus
lower cost. The savings on the energy bill covers the interest rates on the loan that finances the ESCO
and thereby the renovation project.
Energy Supply Contracting (ESC)
ESC ensures delivery of useful energy.

Useful energy refers to the energy that
the customer has “practical” use for,
such as: heat, cooling, steam,
compressed air etc (as opposed to
energy carriers such as oil, biomass
fuels etc). The ESCO will take on
responsibility for everything needed to
deliver the useful energy to the
customer. For example, in the case of
heating, this includes planning and
instalment of heat boilers, energy
distribution, operation and maintenance
of the production facilities,
procurement of fuel etc. ESC is Figure 3 Energy Supply-Contracting business model
generally oriented towards
decentralized (local) power supply Figure 4. ESC business model
rather than larger centralized solutions.
However, the ESC model can be used to build up DH systems as well. (Figure 4)
In most cases, ESC is investment free for the customer and the contracts typically run for 10-15 years.
Energy efficiency measures are taken on the supply side to ensure lower cost of operation. Energy savings
are typically around 10-20%. The biggest weakness of ESC is that all the efficiency measures stay on the
supply side; there are no incentives to lower the demand side consumption.
- 10 - | Page
Energy Performance Contracting (EPC)
EPC is a performance based business model. This means that the ESCO will be remunerated based on
the energy savings generated through the EPC project. The cost savings from the energy efficiency
measures will help finance the project. (Figure 5)
Characteristic of EPC is that the ESCO will guarantee a minimum savings level that they are then
responsible in reaching. An energy baseline (energy usage before project) is set up before the project
implementation. The energy usage after the project implementation is then compared to the baseline to
determine the level of reached energy savings. There are two common forms of EPC, guaranteed savings
and shared savings. With the guaranteed savings model, the customer will finance the project (either
through own funds or through loans) and the ESCO will in return guarantee a minimum energy savings
level (percentage). Savings exceeding the guaranteed level will be split between the ESCO and customer.
With shared savings the ESCO finances the project and the savings are then split between the customer
and ESCO according to a predetermined split.
EPC is well suited for large scale projects, especially in the public sector. The savings guarantee helps
make EPC a “safe” investment; this is especially attractive in the public sector. EPC projects typically
generate 20-30% energy savings and the contract times are generally around 10-15 years. The EE
measures are generally directed at demand side measures but supply side measures (such as setting up
efficient heat boilers) can also be incorporated. EPC is a complex contract form that is not suited for
smaller projects because of the high transaction costs. Procurement in the public sector can be complex.
The long payback times that are generally associated with EPC can make it less attractive for the private
sector. Setting up an energy baseline can be hard and the measurement and verification process needed to
follow up on the project results can be costly.
EPC has been used successfully for the past ten years and seen a significant growth in the past five years.
The vast use of DH also affects the type of EPC projects being carried out. Projects are usually
concentrated to demand side measures since there is seldom any need for supply side measures (covered
by DH).
Figure 5. Shared-Savings EPC Financial Model (left) and Guaranteed Savings EPC Financial Model
(right)
Europeans seem to prefer, at the margin, guaranteed-saving schemes, since they use shared-saving
contracts to a lesser extent (Marino et al., 2011). Projects that incorporate supply side measures do exist
but are mostly concentrated to the cases where customers have oil heat boilers that need conversion. The
vast majority of EPC contracts are done in the public sector and customers in this sector generally can get
more beneficial financing on their own than any ESCO can provide.
- 11 - | Page
Chauffage
Chauffage, also referred to as comfort contracting, is a contract form that revolves around providing a
function. The function can be related to temperature, lighting level, air quality etc. Some examples can be:
keeping a room at 21 degrees or keeping a work area at 500 lumen. The most common function is to
provide a certain (or relative) temperature in a facility, “conditioned space”. Firstly, the current cost
baseline will be set up; looking at what the customer is paying prior to the contract to provide the
function (for example, energy costs, service and maintenance of the technical facilities etc.). (Figure 6)
The ESCO will then deduct an

amount from what the customer is
paying prior to the contract and offer
the customer a fixed price that is
lower than the current costs. For
example, if the customer is paying
€10.15 per square meter a year to keep
a space conditioned at a certain
temperature, the ESCO might offer
the customer a fixed fee of €10. The
ESCO will be responsible for
everything needed to provide the
function, this can include setting up
heat boilers/coolers, procurement of
fuel, operation, service and
maintenance of production facilities as Figure 6. Chauffage Financial Model
well as customer side technical installations. To lower the cost of operation and maximize their earnings
the ESCO will optimize and implement energy efficiency measures. Contract lengths can vary, from a
couple of years up to 25 years. The longer the contract time, the more long-term investments the ESCO
can make in the facilities. The chauffage model incorporates energy efficiency measures on both the
supply side and the demand side, making it an “integrated” model.
Compared to EPC, chauffage contracts are generally less complex with lower transaction costs and
without the same need for costly measurement and verification. On the other hand, EPC contracts may
have more comprehensive demand side EE measures reaching a wider range of areas and may be better
suited for larger building pools. The chauffage model works especially well in the commercial buildings
sector.
Integrated Energy Contracting (IEC)
IEC is a newly developed business

model that combines elements from
both ESC and EPC. The aim of IEC
is to create an integrated model that
involves both supply side and demand
side energy efficiency (EE) measures.
The model tries to solve some of the
problems with EPC and ESC; EPC
being overly complex and expensive
for many projects and ESC being
completely supply side oriented. The
model can be said to extend the ESC
model by including demand side
measures. The creators of IEC also Figure 7. IEC Business Model
stress the importance of offering
- 12 - | Page
demand side EE measures before moving on to supply side measures. To solve some of the problems
with EPC, the costly measurement and verification and baseline setting processes have been replaced by
the use of quality assurance instruments (QAI). The QAI aims to secure the function of the EE measures
rather than quantifying the actual energy savings (as is done with EPC). To do this, simpler (cheaper)
tools are used. For example, instead of measuring energy savings, calculations can be made to calculate
expected savings, so called deemed savings. Other examples can be to use thermal cameras to ensure the
function of insulation improvements etc. The specific QAI used will have to be tailored for the individual
project. Some measurements can be done to assure the functionality, but not as comprehensive as with
EPC. (Figure 7)
Facility Management (FM)
FM is by itself not an energy service. It is instead a way of managing facilities by incorporating various
facility related services into an integrated solution. FM works with a wide area of services such as:
catering, security, cleaning, mailroom etc. FM companies can also choose to incorporate energy related
services into their offerings. Exactly how this is incorporated can vary between different companies and
different contracts. Many FM companies have chosen to incorporate an EPC model where they will
guarantee energy savings. There is an increasing cooperation between FM companies and ESCOs, this
development will likely continue. So far the results have not been overly positive; many customers have
been disappointed with the results. Several of the FM companies providing energy services are new to this
field and may need to change the way they approach it.
ESCO Markets in Europe
In recent years there has been an increased interest in the provision of energy services to achieve energy
and environmental goals. In particular some new companies providing energy services to final energy
users, including the supply and installations of energy efficient equipment, and/or the building
refurbishment, have started to operate on the European market13.
The ESCO markets are extremely diverse in Europe. It was not until the 1990s that the ESCO industry
and EPC started its Renaissance in many European countries. At the same time, the unique opportunity
offered by complete restructuring of certain sectors of the economy (in particular banking and energy
sectors) due to the transition was seized in countries in Central and Eastern Europe (CEE), and
contributed to ESCO development in this region. Other CEE countries, with slower reforms, have lagged
behind on the energy efficiency services scene.
Subsequently information about the selected European ESCO markets is brought out. The countries are
selected based either on location and climate conditions similar to Estonia (Nordic countries), long
experience and size of the market (Germany) and finally based on the historical background (former
Soviet Union, usage of DH and size of GDP (Poland). Furthermore, Annex 3 gives an overview of the
other Central and Eastern Europe markets14.
13 http://iet.jrc.ec.europa.eu/energyefficiency/esco
14
http://www.ifc.org/wps/wcm/connect/dbaaf8804aabab1c978dd79e0dc67fc6/IFC+EE+ESCOS+Market+Analysis.pdf?MOD=AJPERES
- 13 - | Page
Sweden
Energy efficiency services market
The energy service market in Sweden has grown significantly during the last ten years. The development
has been led by building and control manufacturers up until recently. During the last few years, several
energy companies (especially municipal) have started to provide energy services as well and this is a
growing trend. Sweden has a large share of DH which affects what types of energy services are being
offered. DH is the dominant form of heating for apartment buildings, commercial and other premises,
meeting 93 % and 83 % of the respective markets in 201015. Most of the larger buildings (multi-dwellings,
office, commercial, public) use DH as their main form of heating service. Single-household dwellings and
smaller detached houses uses other combinations of heating where electricity is the most common. Single-
household dwellings and smaller detached houses use electricity as the most common source of energy.
The ESCO market in Sweden has seen a significant growth since the year 2000. An estimate of the
turnover for energy services in 2008 was €85 million. This is however a low estimate and the real number
is probably higher16. Since 2008, the energy service market has continued to grow and any estimation of
the current annual turnover for energy services should be significantly higher. The realized energy savings
potential in Sweden can be considered low17. The energy savings potential in the buildings sector has been
estimated to 23%, or 34 TWh per year to 2016, according to governmental investigations18.
Naturskyddsföreningen (national environmental NGO) and SWECO (consulting firm) did an
investigation of their own and found that Sweden could halve their energy usage by 2030. Their
estimations found that the buildings sector could save 55-80 TWh. (Naturskyddsföreningen 2011).
According to calculations made by Swedish ESCO division of Schneider Electric, 3.7 billion SEK (~€400
million), or 4.9 TWh or 3,7 million tons of CO2, could be saved every year in the public sector alone by
implementing energy savings measures19. Most of the calculations made about the potential of energy
services in Sweden are concentrated on EPC (see EPC-section on page 14 for more details). Other energy
services are gaining acknowledgement in newer reports such as Energimyndigheten (2011)20, Grontmij et
al (2009)21. However, calculations of potentials for other energy services are still something that needs
further research.
The energy price has been exceptionally high during the recent years partly due to problems with the
nuclear power plants22,23,24. Since about half of Sweden’s electricity is produced from nuclear power, this
has had an effect on the energy price. The higher energy price creates a larger potential for energy services
but it is worth noting that high prices are likely to be lowered. This can be important to keep in mind
when providing or developing energy services that may be sensitive to energy price drops and it can
potentially create a short-term decline in the interest for energy services.
Business models in Sweden
ESC25 is not a well-known concept in Sweden and the awareness about the model is low. An important
reason for this is the well built-out DH system. The biggest sector for ESC is the industrial sector. There
are some new ESC companies that are trying to compete with DH in the residential sector in areas where
DH is expensive.
15 http://www.energimyndigheten.se/Global/Engelska/Facts%20and%20figures/Energy_in_sweden_2012.pdf
16 Lindgren Soroye. K and Nilsson, LJ., 2010. Building a business to close the efficiency gap: the Swedish ESCO Experience, Energy
Efficiency 3: 237-256. (http://link.springer.com/article/10.1007%2Fs12053-009-9069-3)
17 Energy in Sweden 2011
18 http://www.buildup.eu/publications/20833
19 http://pr.schneider-electric.se/Files/Pressinformation/2011/110321_Schneider_rapport_energieffektivisering.pdf
21
http://www.svenskfjarrvarme.se/Global/FJ%C3%84RRSYN/Rapporter%20och%20resultatblad/Rapport%20marknad/2009/Fr%C3%A5
n%20bulkleverant%C3%B6r%20till%20energipartner%202009_31.pdf
22 http://rt.com/news/swedish-nuclear-reactor-gothenburg-589/
23 http://www.nytimes.com/2007/02/14/business/worldbusiness/14iht-sweden.4596537.html?_r=0
24 http://www.bellona.org/articles/articles_2012/oskar_1_2
25 The term that is usually used for ESC in Sweden is “färdig värme” (for heating)
- 14 - | Page
Some ESCOs, like Neova, offers industrial customers like sawmills ESC services where they will install
heat boilers on the site and run and operate these. Vattenfall has also had this service for industrial
customers with energy deliveries in the TWh range. Some ESCOs however are starting to provide ESC to
residential property owners. The risks can be seen as lower in this sector compared to the industrial since
the residential properties are more likely to still be there in 10 years time compared to an industry
customer that could potentially go bankrupt in that time span. ESC is also available on the electricity side,
eg. Vattenfall has had services such as “useful electricity”, “useful lighting” where the company installs,
operates and maintains customer side facilities during a contract period of typically 5-10 years26.
A more common service which is closely related is service and maintenance contracts where usually an
energy company will take over responsibilities of the service and maintenance of an existing customer
supply facility. However, they are not involved with the planning or installation of the plant. And more
importantly, there are no real incentives to run the plant as optimized as possible since this is not how
they typically are remunerated. So an ESC contract (which includes service and maintenance) will
generally provide larger energy savings because of its built-in incentive for energy optimizing.
EPC – In Sweden, a combination of guaranteed savings and the two-step model is by far the most used.
This leads to less risk for the EPC companies compared to the one-step model and shared savings which
could generally result in more comprehensive projects. Most EPC have a contract length of around 10
years. The average payback time for EPC projects in Sweden is 10-12 years (Energimyndigheten, 2011)27.
But there are indications that customers are willing to accept even longer payback times since the EPC
model has gained more recognition and trust. Several projects have payback times that are over 15 years
which can be seen as a very good thing since it will lead to more comprehensive projects with larger
energy savings.
Typical for the Swedish EPC market is that the ESCO does not take on service and maintenance in their
EPC projects, this includes the cases where supply facilities are installed. Outsourcing of the service &
maintenance organization has so far not been a driver for EPC. Guaranteed savings is the standard EPC
model being used. The Swedish EPC market is maturing; customers have a higher awareness about the
model today compared to just a few years ago. This shows in the way that projects are procured where the
procurement process is becoming more standardized.
IEC is not common in Sweden. Energy efficiency has traditionally had a strong polarization to either
demand side or supply side measures. There are ESCOs working in the industry that may work with some
integration principles but they seldom include service and operations of the supply facilities. These
contracts are usually also without any savings guarantees. Energy consultants are also active on this
market. There are demand side projects where the supply side has been added, usually without service and
operation. Then there are also examples where energy contracts have included the supply side but in the
“opposite way”. Many industries don’t have a problem with getting heat; they have a problem with getting
rid of heat. In industries which have processes that create a lot of waste heat, taking care of this waste
heat can create large savings. One benefit with having a well built out DH system in this case is that it
makes it possible to use this waste heat and put it into the DH system. Many projects aim to make this
possible by building connections to the DH system. However, this requires agreements between the
industry and the local DH company since there are legal barriers for a third party to connect to the DH
grid. Using waste heat in the DH systems is a very interesting integrated approach that deserves some
attention.
One area where IEC might be a very good complement to the available business models currently used
on the Swedish market is in the private sector. EPC has had a very hard time reaching this market and
perhaps the simpler approach of IEC (with lesser transaction costs etc.) can be more attractive. Especially
if projects are done with shorter payback times, something that is important to large parts of the private
sector. It is also in the private sector where most ESCs are done today.
26
http://www.svenskfjarrvarme.se/Global/FJ%C3%84RRSYN/Rapporter%20och%20resultatblad/Rapport%20marknad/2009/Fr%C3%A5
n%20bulkleverant%C3%B6r%20till%20energipartner%202009_31.pdf
- 15 - | Page
Chauffage, or comfort contracts as they are referred to in Sweden, is a growing business model, which
brings competition to other business models. The use of the business model has been led by Göteborg
Energi. Göteborg Energi is a municipal utility (municipality of Gothenburg) that has been working with
energy services since the early 90s. The company offers a range of energy services and their comfort
contract is one of their top-of-the-line offering. The energy service portfolio that Göteborg Energi uses
has been spread to some other municipal energy companies and today there are three energy companies
in Sweden who are using the chauffage model and a fourth that is starting up. (Mälarenergi28,
Öresundskraft29 and Lunds Energi30)
Many customers come from the commercial sector for which the chauffage model is especially beneficial.
About 25% of Sweden’s building space consists of commercial properties31 which indicate a big potential
for the business model. Currently mainly municipal utilities are showing interest in the model. A reason
for this can be because they are generally a lot more serious about energy service than the large utilities.
The chauffage model is likely to continue spreading amongst the municipal energy companies first and
foremost. The contract period in the comfort contracts is also very flexible and can range from a couple
of years and upwards. The longer the contract period the customer agrees on the lower the fixed fee will
usually be.
FM is a growing trend in Sweden. There are no reports on the extent of energy related services that are
offered as of now; this is an area where future investigation is needed32. Many customers are requesting
energy services from FM companies. These customers are generally already using FM companies for
other services. Some FM companies have started to offer an EPC model with guaranteed savings.
However, so far many customers have been disappointed with the outcome of the projects. There are
several reasons for this.
 Companies are simply new to this. It can take some time and experience before the companies
learn how to provide energy service in a good way.
 There is a shortage of qualified people in the facilities. FM might be a good way to manage people
who carry out services in a facility, but in order to manage people who take care of energy
optimizing etc., you need highly skilled personnel in the facilities.
28 https://www.malarenergi.se/
29 http://www.oresundskraft.se/
30 http://www.lundsenergi.se/
31
http://webbshop.cm.se/System/TemplateView.aspx?p=Energimyndigheten&view=default&cat=/Rapporter&id=7ce8422c52f142a1b8677d
012634e4e2
32
http://webbshop.cm.se/System/TemplateView.aspx?p=Energimyndigheten&view=default&cat=/Rapporter&id=7ce8422c52f142a1b8677d
012634e4e2
- 16 - | Page
Germany
The German energy efficiency services (EES) market is one of the most established in Europe. Several
national framework conditions supported and support the development of the EES market. Currently,
policies and measures within the German National Energy Efficiency Action Plan as well as of the
German Integrated Energy and Climate Plan stimulate activities to increase energy efficiency. The policy
mix certainly has a substantial influence on the current and future development of the EES market in
Germany. However, there are currently no direct measures to stimulate a broad introduction of EES in
the different market segments33.
The number of ESCOs and ESCO-like companies can be estimated at being about 50034. There are two
associations of ESCOs:
 ESCO Forum within the ZVEI (association representing larger ESCOs), which has 24 members35.
Among these are subsidiaries of Germany’s multinational energy companies, big heating and
building control equipment retailers and also some big public service companies.
 ‘Verband für Wärmelieferung (VfW)’. This association of providers of heat delivery services has
255 members, of which 80 conduct energy supply contracting projects that in principle can, but
do not necessarily, include energy efficiency measures36. Among the members of the VfW are
mostly installers / suppliers of heating systems, public service companies and building control
equipment retailers.
According to reports, Germany has the largest economic savings potential in the EU37. The reason for
this is mostly because of the large building stock (compared to other EU countries) rather than the
relative savings from each building. There is a general consensus amongst energy experts that the market
will continuously grow, not least as a result of the expansion of combined heat and power usage 38. The
growing use of renewable energy can also raise the potential for energy services. Another important fact
to consider is the role that energy services will take in the future in realizing the phase out of nuclear
power. This might very well help raise the potential of the market making more projects economically
feasible.
The use of combined heat and power (CHP) is becoming more important in Germany and it is a very
good way of increasing the effectiveness on the supply side. Incorporating both electricity and heat
production can create conversion efficiencies of over 90%. The German government is actively working
to promote the use of CHP and have instated laws such as the “Kraft-Wärme-Kopplungs-Gesetz
KWKG”. The use of CHP has gone up in the recent years. Most commonly the ESCO will own the
heating or cooling systems during the contract period. Around 70% of the supply facilities are owned by
the ESCO. ESC contracts are used through all sectors. According to Wargert 39, about 50% of the ESC
market is in the public sector where buildings are often put into pools (as with EPC following ESP, see
next section). The public sector is then followed by private residential building sector and then by
hospitals40.
33 National Report on the Energy Efficiency Service Business in Germany 2010

34 http://www.aeecenter.org/files/newsletters/CWEEL/Fall2010/ShirleyHansen.pdf
35 http://www.ecologic.eu/files/attachments/Projects/2358/prasentation_von_hundelshausen.pdf
36 http://www.energiecontracting.de/7-mitglieder/nach-plz.php
37 http://www.ideal-epbd.eu/download/energy_savings_potential_paper.pdf
38 http://www.aeecenter.org/files/newsletters/CWEEL/Fall2010/ShirleyHansen.pdf
39 http://www.davidwargert.net/docs/MasterThesis-David_Wargert.pdf
- 17 - | Page
Business models in Germany
Contracting models in Germany can be simplified in two different basic concepts. The main features are:
the aim of the customer, the way how the investment will be paid back and the question of property. 41
1. Energy supply contracting: The ESCO plans, installs and operates a new energy system. The
ESCO is the owner of the installation and delivers energy to the customer. The customer has to
receive the energy during the contract period only from the ESCO. After the contract period, the
ESCO dismantles the installation or sells it to the customer.
2. Energy saving (performance) contracting: The ESCO plans and installs a new energy system
and/or energy efficiency technology. Depending of the kind of technology the customer or the
ESCO operates the installation. With the new technology energy savings will be realized. The
customer pays to the ESCO the same energy price as before the installation as long as the energy
savings refinance the investment. Especially in the case of efficiency technology the customer
becomes owner of the installations at the beginning of the contract period.
The competition from simpler contract models that extend the supply side with demand side EE
measures (like IEC) is likely to grow. Because of the vast amount of ESC projects being carried out and
the need to improve energy efficiency throughout society, this will very likely be a growing threat to EPC.
The complexity of EPC is a barrier and one of the big reasons why customers will choose a simpler
contract form. The transaction cost associated with EPC make it unsuited for many projects and with
growing competition from other contract models it is likely that EPC will see threats especially among
smaller projects. The complexity of EPC makes the procurement process cumbersome and this can be a
barrier, especially if measures are extended to include building shell refurbishment. FM-companies are
gaining interest in the EPC market and this could affect the market (see the FM-section). Contract forms
such as Chauffage could potentially become a competitor to EPC, especially in the commercial property
sector. EPC has not really gained a strong foothold in the private sector; the short payback times often
required do not work well with EPC. In the private sector energy efficiency investments could also be of
lower priority compared to other investments.
ESC can be considered the most important energy contracting form in Germany, having a market share
of around 85%. The majority of the companies that are active on the energy contracting market do offer
ESC. Most ESC contracts are done in the public sector followed by the private residential sector and then
hospitals. The vast majority of ESC contracts are done investment free for the customer. It is likely that
ESC will meet some competition from integrated business models in the future that incorporate demand
side energy efficiency measures as well.
The heating system is more dependent on decentralized solutions and many buildings use more localized
supply, either in direct relation to the building or as part of a local DH system. In Germany 50% of the
heat from DH grids is delivered to private customers, 44% is delivered to public buildings and customers
from the area of business, trade and services. According to the Federal Statistical Office in Germany DH
has a market share of 13.3% relating to all occupied accommodations42. Typically, the ESC contracts are
investment free for the customer. About 95% of all the ESC contracts are done without customer
financing. Customer costs that may arise are more connected with secondary technical installations in
their facilities. The contract lengths are typically around 10-15 years.
EPC has a market share of about 10-15%. Maintenance and administration of technical installations has
about 5% of the market43. Even though energy services are widely used in Germany, there still exists some
suspicion from many customers towards energy contracts. The trust issue is of very big importance in
Germany. This can in some cases lead to advantages for local ESCOs and utilities which are known to the
customers in the region. It can also make it hard for newcomers on the market to establish themselves,
41 http://solarthermalworld.org/sites/gstec/files/story/2013-06-18/escos.pdf
42 http://ecoheat4.eu/en/Country-by-country-db/Germany/Overview-of-National-DHC-Market/
- 18 - | Page
having good reference projects to show can be very important. Both shared savings and guaranteed
savings are used on the German market. However, the shared savings model is the most used. One driver
for using shared savings is that municipalities often need help with financing and therefore prefers this
model where the ESCO takes on the financing responsibility. EPC contract length can vary between 5-15
years. The Shared savings model will usually demand a somewhat longer-termed contract in order to
remunerate the ESCO compared to a guaranteed savings contract.
The German EPC market is highly competitive and it is very hard for smaller or new ESCOs to establish
themselves on the market. There are only about 10 ESCOs that are active on a regular basis in the EPC-
market. The most active companies are: Siemens, Hochtief, YIT, MVV AG, Johnson Controls, Evonik
New Energies, Cofely, Sauter, Imtech Contracting, Getec AG. These companies are characterized by their
large size and credit-worthiness. Smaller companies working with EPC, such as municipal utilities, usually
work on a local level and do not engage in numerous EPC projects44.
The ESP model has in many cases made it easier to implement EPC since it is standardized and follows a
simpler model. The projects follow a one-step model and shared savings is used. The combination of the
one-step model together with shared savings may have lead to many projects not being as comprehensive
as they might have been with a two-step model and guaranteed savings because of the higher risks and
absence of an in-depth analysis. For simpler projects the one-step model can be desirable, but many of
the projects that have used the Berliner Energieagentur ESP model have in fact been very complex. Using
a one-step model and shared savings in a complex project will lead to higher risks for the ESCOs and to
limit risk the ESCO will focus on “safe” solutions with shorter payback time. This has had an effect that
many projects are somewhat focused on the “low-hanging fruit”. On the plus side, the ESP model has
made it easier to implement the EPC projects and thereby helped to realize projects that would otherwise
probably not have been carried out. The model has also helped to spread awareness and built up a larger
base of good reference projects and raised the trust in the EPC model. It has also helped in creating a
more standardized procurement process.
EPC contracts are more common in some parts of Germany compared to others. The eastern regions for
example have not carried out as many EPC projects as in other places. There can be many reasons for the
differentiated occurrence of EPC contracts. Each Bundesland have their own legislations and policies and
some Bundesländer have worked more pro-active to support energy services. It is likely that the
awareness and trust issue plays a major role in the geographical differences. In the more frequent EPC
regions there exists a better infrastructure for EPC projects as well, with more active energy agencies to
help facilitate projects. In regions such as Berlin, EPC has been done for many years and has gained trust
amongst the customers and the awareness is high. In some places such as North Rhine Westphalia
(NRW) the housing structures may have worked as a driver. There are many buildings in NRW that have
problems like: having old plumbing that cannot be renovated and need total replacement. This is a costly
process and by including measures like changing the plumbing into an EPC project, it becomes easier to
finance the measures. This can act as a driver for EPC. The same reason can however work as a barrier in
other places where customers will be less likely to invest in an EPC project because the scope of the
project will become too big because of expensive and complex measures such as this. If the customer is
not convinced about the benefits of EPC, reasons like this can be a tipping point in choosing not to
invest in EPC.
A big driver for using shared savings in Germany is financing. The municipalities in Germany are
generally high leveraged and can not get beneficial loans easily 45. By using shared savings they do not have
to make the upfront investment which makes it easier to engage in an EPC project. Many of the larger
public institutions already have in-house competence on energy and would perhaps want to do the EE
measures themselves but don’t have the finances, the ability to get help with the financing is therefore a
driver to hire an ESCO. Another driver for using shared savings is the fact that the customer gets benefits
from the savings, basically from day one. Because they haven’t made the upfront investment they don’t

45 Sjögren, Schulz, 2011; Desktop market study, Germany; internal report; Schneider Electric – Energy Solutions; 2011
- 19 - | Page
have to worry about the payback time in the same way, but still get revenue from their part of the savings.
This makes it attractive for the customers. On the other hand, the customer maybe would have gotten a
more comprehensive contract if they chose guaranteed savings instead, because of the lower risks for the
ESCO.
IEC is a business model that is tailored for German (and Austrian) market conditions. Projects that have
been implemented using IEC have been done in Austria, but the experiences from them can be directly
translated to the German market. The German contracting market can be said to be more or less divided
into ESC and EPC (with other contract forms having a very small market share) and looking at the huge
potential to expand the ESC model, the ESCOs that succeeds in implementing an integrated contract
model such as IEC on a larger scale would be able to reach a very big market. Having a clear and
uniformed integrated contracting model would really help in spreading the awareness about this to
customers and energy agencies etc. and IEC is a good candidate for this. The market potential for IEC or
IEC-like models is huge in Germany.
The chauffage model is not common in Germany. There are other models being developed that
resemble it which can indicate that there is interest for this type of model. The opportunities for
chauffage can be seen as good in Germany. There is a need for models that go beyond the supply side
and that is simpler than EPC. Chauffage could be a very good candidate, at least in certain sectors and it
could also benefit certain types of ESCOs. Chauffage could be very well suited for municipal energy
companies willing to extend their energy services. Local companies have a huge advantage as trust is very
important in Germany. Considering the higher amount of DH and lower competition from EPC in
eastern Germany, perhaps this could be a good place to start providing the service.
The commercial property sector is especially suited towards chauffage and there should be a large
potential here since most contracting offers today in this sector are ESC. Because the tenants in this
sector are usually very dependant on the “comfort” level, chauffage, or “comfort contracting”, can be
seen as having a very high potential. Chauffage would provide a higher level of service than what ESC can
provide. The inclusion of the customer-side technical facilities and the fixed price model should make it
very appealing to many customers. Even if the problem of the tenant/landlord problem can't be solved,
chauffage can still be attractive. For example, if rents are very high (~€300 per square meter/year) in a
commercial building, the cost of losing a tenant due to inadequate comfort level outweighs the potential
loss of saved energy (which would in this case be attributed to the tenant) with a magnitude of up to 100
times (considering typical energy savings per square meter/year).
FM - There is a growing interest for FM integrated energy services, often using an EPC model. In some
instances it has been easier for ESCOs to acquire an EPC contract if they cooperate or merge with an
existing FM company. As in Sweden, some of the early attempts to include EPC have not turned out as
successful as expected. But with the raising interest in providing energy efficiency together with FM there
will likely be a growth in the market. Since the German EPC-market is so competitive, probably the most
competitive in Europe, it will be tough for new companies to establish themselves on the market, this of
course includes the FM companies.
- 20 - | Page
Denmark
In the ESCO model used in Danish municipalities, the client provides the investment (i.e., no private or
third-party financing), and the ESCO-supplier implements the energy retrofitting initiatives, and
guarantees the agreed level of energy savings. ESCO contracting can be seen as a new approach to
implement energy saving measures in existing buildings. The Danish market for ESCO-contracting is
rapidly increasing, also compared to other EU-countries. This is mainly due to growth in ESCO-projects
on municipal buildings, where approximately 30 municipalities (out of 98 municipalities in Denmark) have
signed ESCO-contracts or are preparing to do so.
On a national level, ESCO-contracting has been promoted and encouraged in different policy papers on
energy savings in the existing building stock. It is seen as an essential input for reaching international as
well as national goals on energy savings and CO2 reductions (including the European 20-20-20 goals). As
in other countries, the EU Directive on the Energy Performance of Buildings has been a driver for
governments to encourage development of energy services, as well as the EU Directive on energy end-use
efficiency and energy services has encouraged governments’ motivation for setting energy saving targets
and practicing energy efficient procurement.46
Municipalities can be seen as locomotives for ESCO-contracting in Denmark, and the municipalities’
experience with ESCO-contracting is likely to influence the rest of the ESCO market. There is still a
widespread skepticism towards the ESCO-concept amongst many municipalities, consultants and other
stakeholders, and debates are going on between municipalities on the pros and cons of ESCO-
contracting. This include views on the transaction costs related to ESCO-contracting and about the
economic viability of the ESCO-model, especially in comparison with managing the energy retrofitting of
municipal buildings as an entirely in-house project.
The development of the Danish market has to large extent benefitted from the Swedish and German
market experience. At the time when the Danish market emerged in 2007, about 20 Swedish
municipalities had already signed an ESCO-contract. Many ESCO providers (such as Schneider Electric
(ca. 50% of market), Siemens and YIT) have built their competences and gained experience on the
Swedish market, and afterwards applied it on the Danish market. This has given Danish municipalities
more confidence in ESCO-contracting, as the providers could refer to cases from similar municipalities in
Sweden. Also, different ESCO-providers have been actively promoting ESCO-contracting through
repeatedly visits to the municipalities. In spite of the large influence from the Swedish market, the Danish
market has its own characteristics. In Denmark, the ESCO-projects are often highly politically profiled, as
a part of the municipalities’ climate agenda. There is no doubt that the political focus on climate policy
and energy savings has played a large role for the development of the ESCO-market. This has encouraged
municipalities to formulate climate strategies, and goals for energy reductions in own buildings, and in the
municipalities in general.
The limited national capacity building, including standardization efforts, is perhaps reflected in the
variation of ESCO-approaches being used by the municipalities. Often municipalities emphasizes that
their ESCO-contract has been designed especially for their municipality, which reflects a large degree of
local adaptation and subsequently a large degree of ownership to the project. The first ESCO-contract in
a Danish municipality was signed in 2006 (started in 2009) by the municipality of Kalundborg, followed
by municipalities Gribskov and Middelfart. These three municipalities formed their own “ESCO
network”, with close collaboration and knowledge-sharing in the initial phases, leading to several ideas on
how the ESCO-concept could be disseminated to other municipalities. From 2010, several other
municipalities have signed ESCO-contracts, or are preparing a tender for this purpose.
46 http://www.mdpi.com/1996-1073/6/5/2407
- 21 - | Page
The project periods in the contracts are typically between 8 and 10 years. In all cases the municipalities
finance the retrofitting, and the ESCO-provider guarantees a certain energy reduction. If the guaranteed
savings are not met, the ESCO-provider will pay the client the difference. If the ESCO-provider saves
more that guaranteed, the contract specifies how this surplus is shared between the ESCO-provider and
the client. Other typical features in the ESCO-contracts include Energy Labelling of the municipal
buildings and training of the municipal staff. Table 1Error! Reference source not found. shows key
igures from the ten Danish municipalities studied in this project. These ten municipalities were amongst
the first to sign a contract. The projects are almost all in the operation phase.
There is a large variation in the number of buildings included in the ESCO-contracts (from 10 to
260), with an average of 60 buildings (or 122,000 m2) per contract. Moreover the investments in
the buildings varies, from 22 €/m2 to 89 €/m2, with an average of 49 €/m2. The guaranteed
energy savings in the contracts ranges from 16 to 31%, with an average of 21%. This is similar to the
saving levels on the Swedish ESCO-market, but might be low in a global perspective, where saving
potentials up to 50% in public buildings have been reported. The Danish cases show that the guaranteed
savings are influenced by a number of factors, and not only the investments per m2. These factors include:
The standard of the buildings at the outset; well-maintained buildings (e.g., Høje Taastrup)
generally reduces the guaranteed energy savings;
The volume of buildings included in the contract; if only buildings with a high energy saving
potential are included in the contract, this will increase the guaranteed energy savings. On the
other hand, including very few buildings will increase transaction costs (e.g., Kalundborg);
The degree of building improvements in the ESCO-contract; if long-term energy savings or
general improvements on the buildings are included, the investments will increase, but the
guaranteed savings might not be remarkably higher.
Table 2. Status for ESCO‐contracting in Danish municipalities47

Municipality Magnitude ESCO Contract Improvements of:
Contractor period
Kalundborg 10 buildings, TAC 2009-2021 Technical system and installations
20,000 m2
Middelfart 100 buildings, TAC 2008-2015 Installations and indoor environment in all
190,000 m2 municipal buildings and re-insulation of a few
buildings. Energy labelling of all buildings.
København 27 buildings, DONG 2009-2018 Energy savings and energy labelling of properties in
68,000 m2 the nursing facility “De Gamles By”.
Gribskov 100 buildings, TAC 2009-2016 Energy savings through better management and
190,000 m2 technical improvements of buildings.
Vallensbæk 40 buildings, Dansk 2009-2019 Technical systems and building envelope for the
114,000 m2 Energi municipal buildings. Energy labelling
Management
A/S
Kerteminde 60 buildings, 2009-2019 -
117,000 m2
Høje Taastrup 270 buildings, -
270,000 m2
Halsnæs 120 buildings, YIT 2009-2021 Installations and building envelope as well as
130,000 m2 incentives for users to savings.
Greve 12 schools, Siemens a/s 2009-2016 Better heat regulation, ventilation and lighting in
2
110,000 m schools and kinder gardens.
Sorø all buildings - - Energy systems and building envelope for all
municipal buildings.
47 http://vbn.aau.dk/files/52279920/ESCO_Jensen_et_al.pdf
- 22 - | Page
The studies of the Danish experiences using ESCO-contracting in public buildings illustrates that there is
a large potential for using the model, which is empirically supported by the increasing growth of ESCO-
contracting amongst the municipalities. ESCO-contracting in public buildings suggests that ESCO-
contracting, under the right circumstances, is an efficient tool for implementing energy savings in existing
buildings. On one hand, many Danish municipalities have, motivated by political demands for energy
reductions, formulated ambitious climate policies, and on the other hand the ESCO-providers have
actively promoted ESCO-contracting. The absence of an active national ESCO-policy might have slowed
the development, but it might also indirectly have contributed to a more market-based, flexible and
context-dependent concept. What seems as a more or less uniform concept is revealed by a closer look to
have many different drivers and logics for the municipalities. This includes issues on financing, on
political commitment to pursue energy reductions, on defining the ESCO-tender and composing different
types of initiatives in buildings, issues on competences and the internal municipal organization, and the
traditions of carrying out public-private collaboration.
Business models in Denmark
EPC with guarantied savings is the most common contract type. Two of the most active ESCO
providers, Danfoss Solutions and TAC (Schneider Electrics), active respectively in industrial projects
and in the municipal sector, both offer guarantied savings in EPC contracts with and without financial
solutions. Smaller companies collaborate by forming consortiums for tenders with one contract holder.
As in other Scandinavian countries, third part financing is uncommon for this type of projects.
Municipalities use state funds and industrial clients fund themselves with credit lines through banks or
internal funds.
The collaboration projects between research institutes, industry associations and the Danish Energy
Agency (DEA) and the Danish Enterprise and Construction Authority aim at explaining the ESCO
concept, its benefit for different actors and the EPC process with the development of EPC models and
an ESCO network. The main driving factors for the growth of ESCO projects have been climate
awareness, CO2 quotas and cost savings. The cost savings and opportunity to finance the replacement of
old infrastructure with the energy savings and the opportunity to improve the green image internally and
externally are a strong motivation both in the private and public sectors. EPC is stated to be still a new
and unproven concept where both clients and providers need to gain experience and trust in the concept.
The most common barrier to ESCO projects is the small size of projects and high transaction costs.
Other reported barriers remain the mistrust from the clients and the contracting with unstable customers
for private apartment houses with shifting tenants. There is still a strong reluctance to outsource and the
utilization of EPC is very limited among energy suppliers, construction companies and consultancies,
industrial energy consumers and technology providers. Factors contributing to the market growth include
improved awareness and confidence in the ESCO concept, along with traditionally strong regulatory
focus on energy efficiency and energy savings.
The integrative ESC-approach – aim is to make energy savings with a short payback time finance
investments in general building improvements. 4 municipalities (Høje Taastrup, Kerteminde, Sorø and
Halsnæs) have used an integrated ESC- approach, where improvements such as improving the indoor
climate, improving and insulating the building shell (facades, roof, windows), solving PCB-problems, and
integrating renewable energy sources, such as PV’s and heat pumps, have been included in the contract.
The total investments and investments per m2 are relatively large, but the guaranteed savings are not
systematically higher compared to municipalities having used the basic approach.
As a contrast, some of the municipal ESCO-projects using the basic approach include only buildings with
the highest energy saving potential, which gives a higher guarantee of success. Integrative ESC-approach
requires more work by the municipal administration, more local adaptation in terms of coordination
between improvements of installations and buildings, and more innovative thinking about how to design
the ESCO-contract. Aso, it demands a larger degree of partnership between the municipality and the
ESCO-provider, as the projects becomes more complex. A guarantee from the outset is attractive, but
- 23 - | Page
might also prevent more ambitious goals and innovative approaches being defined by the municipality in
the pre-tendering phase. If they at the outset allow a more open discussion about the ambitions with the
ESCO-project, it is likely that they will formulate more ambitious or integrated projects, where the
guaranteed savings are defined through the tendering process, as one out of different targets. Therefore,
the integrated approach might not be a formulated strategy at the outset, but might emerge along the
process of defining the tender.
In the municipality of Høje Taastrup, the preparations for ESCO-contracting showed that the buildings
were in a better shape than expected, which made it difficult to find the 15% energy reduction that was
the target. Therefore they included solar panels in the contract. The city council had to accept that the
payback period was extended from 15 to 20 years, which according to the civil servant was a great
challenge. The municipality of Halsnæs started out with a conservative aim of 15% savings that they were
certain that they could find, but they ended up defining more ambitious goals, including that 15% of the
reductions should come from renewable energy, and 35% from improvements of the building envelope.
- 24 - | Page
Poland
The potential for energy saving measures in the building sector in Poland is still very high. The building
sector is responsible for almost 30 % of the total energy consumption. There are several barriers why the
EPC concept is not commonly used. The most important are48:
1) Bad experience with past investments resulting in distrust among potential customers,
2) Lack of awareness regarding the potential of EPCs is a tool to tap energy efficiency potentials,
3) Insufficient legal conditions, particularly in the public sector,
4) Limited availability of capital: the economic condition of ESCO companies is still weak, limiting the
further market development.
As a system of current monitoring of ESCO services is missing, it is difficult to provide a precise estimate
of turnover on the Polish ESCO market. It is very probable that selected large market players monitor its
size. However, these data are treated as a commercial secret of companies that take effort to collect them.
Nevertheless, based on knowledge of experts (mostly representatives of the highly active ESCOs), one
may define threshold values specifying the scale of ESCO investments in Poland. Although experts differ
rather significantly in their estimates, they agree that the ESCO market turnover last year was not lower
than EUR 10 million. This value should be treated as the lower range estimate. Opinions voiced by some
large market players suggest that the ESCO market turnover may in reality be much higher – its upper
range value is estimated at EUR 25 million. Representatives of companies that specialise in lighting and
electricity investments tend to define the turnover of ESCO contracts in electricity at the level of EUR 13
million annually. This confirms the claim that the assumed lower band value of EUR 10 million for the
whole ESCO market is a significant underestimation and the actual turnover is much higher. Therefore,
for the purposes of preliminary calculations, the value of EUR 25 million can be regarded as a realistic
estimate for the upper band of the ESCO market turnover last year. Some companies, however,
implement a lot of contracts in a form that goes beyond the ESCO concept, and as such have not been
taken into consideration in the above estimates. Therefore, it is justified to assume that the total turnover,
including mixed types of contracts, may be even higher49.
Respective segments of the ESCO market are characterised by high change dynamics. According to the
report by Institute of Environmental Economics in Poland, ESCO representatives agree that the volume
of ESCO projects conducted in the public sector has been decreasing for several years now due to
unfavourable legislative provisions that discourage local governments and entrepreneurs from
implementing ESCO contracts. Some significant players on the ESCO market nearly entirely limited their
operation in the public sector due to lack of tenders, which reflects the scale of the changes. Nevertheless,
the public sector remains an important market segment – experts claim that it accounted for 40-50% of
the total market turnover for ESCO contracts in 201150.
A great majority of the experts expresses positive opinions about the development potential of the Polish
ESCO market, expecting that its turnover should increase in 2012. This optimistic approach results inter
alia from information on tenders published so far and expected further ESCO investments in private
sector. Despite the legal barriers that impede significant increase in the investment volume, the public
sector should play an important role in the ESCO market growth in 2012. According to the experts, this
sector stands some opportunities for becoming more open to ESCO contracts.
Although the Polish ESCO market has a significant potential, it still remains at the initial stage of its
development. The number of its players – both ESCOs and clients – is rather small. Experts agree that
the market has been developing rather consistently for several years now. Nevertheless, considering
48 http://www.giz.de/Themen/en/dokumente/en-International-Experience-Developing-ESCO-Markets.pdf
49 http://www.europeanclimate.org/documents/IES_Raport_ESCO_EN_2012.pdf
50 http://www.europeanclimate.org/documents/IES_Raport_ESCO_EN_2012.pdf
- 25 - | Page
various circumstances that favour this development, e.g. growing energy prices or the EU policy
enhancing energy efficiency, this growth should be much faster. Moreover, it is worth noting that the
Polish ESCO market still operates to a large extent as a market that is created by ESCO companies rather
than as a response to spontaneous demand voiced by clients. This requires significant involvement of
ESCOs and other institutions that support this market through information, education and awareness-
raising activities.
Business models in Poland
Contracts in the ESCO field in Poland can be divided into two basic groups51:
 Delivery contracting (Contract for delivery of energy/heat) - A contract for the supply of energy
makes the ESCO obliged to modernize energy generating equipment in or for the facility. The
service also includes operation and maintenance of installed systems. Accounting for those
investments is done based on the amount of energy supplied and its calculated fee, covering
mostly two components:
o Fixed component (cost of investment and other fixed costs)
o Variable component for energy supplied (and depending on fuel prices)
 Energy Performance Contracting (Contract for guaranteed energy savings)
While ESCOs are developing significantly in other EU member states (e.g. Czech Republic, Hungary and
Germany), in Poland this sector is almost non-existent. The European Union clearly indicates the need
for development of ESCOs in Article 6 of Directive 2006/32/EC on energy end-use efficiency and
energy services52:
EPC - Emerging of EPC market has to be related to activities of energy services companies ESCOs.
The end of previous millennium and the beginning of this one has been the period of the infancy stage of
the Polish ESCO industry and still most of ESCOs are struggling to get off the ground.
As the third party financing (TPF) of EPC-like contracts practically doesn’t exist companies with
relatively large balance sheets remain on the market. Under GEF mechanism only few projects applied for
re-financing. As a fact the when the idea of TPF and EPC was entering the Polish market, numerous
projects has contracts formulated in disadvantageous way from the clients’ point of view: obligations were
not commensurate with the scope and the volume of investments as well as reductions of energy costs
achieved.
The conservative regulations of the country law are not ready for any kind of ‘creative financing’ and
implementation of the idea to finance capital improvement from cost reductions cannot be carried
straightforward. EPC concept although widely admired is regarded to be classical example of that.
Under the regime of the former Public Procurement Law there were few very large tenders carried
fruitless. There were many tenders related to energy efficiency but the contractual terms appealed to other
than the ideal EPC rules. (BOOT, outsourcing of services). Nowadays under the new Public Procurement
Law combining EPC ideas and public private partnership starts creation the demand for the services of
ESCO’s.
Flexibility of the rules that could be created under the public private partnership agreement enables
creating pure EPC contracts. Few such agreements were identified in public building sector whereas the
potential of bankable energy efficiency projects in that sector was (in 2009) estimated at the level of 162,5
PJ. The street-lighting sector (of bankable energy efficiency projects potential estimated (in 2009) at the
level of 5,4 PJ) is developing very fast. Several new ESCO companies have been founded since 2010 to
meet the increasing demand of the market. The contracts concluded can be classified just as EPC-like
51 http://change.kig.pl/pliki/ESCO_i_kontrakting.pdf
52 http://www.bellona.org/filearchive/fil_ESCOs_In_Poland.pdf
- 26 - | Page
ones. There is vast technical potential of the EPC market development but legal and financial breaks are
still on53.
The most suitable building categories are administrative and public buildings belong and administered by
the local governments (administrative, schools, kindergartens, hospitals, communal housing buildings,
etc.). There are no special and clear criteria allowing dividing the potential projects into target groups
from the EPC or EDC point of view. There is no evaluation of this issue made in case of Poland.
According to the general rules and expectations of the clients, probably more suitable for EDC would be
the large building complexes (hospitals, hosing estates, prisons, etc.) powered with heating by the separate
local boiler houses. EPC is preferable in Poland according to the opinion of ESCOs’ representatives54.
53 http://www.combines-ce.eu/en-gb/projectindetail/epcmarketsituation.aspx
54 http://www.fedarene.org/documents/projects/EESI/Market_Development/potentials_www_PL.pdf
- 27 - | Page
Finland
Following the recession of the early 1990s, the intensity of total energy consumption and end-use
(koe/€2000) started to fall in Finland in 1995. Although energy consumption rose, gross domestic
product grew even more robustly. The downward trend continued until 2008, after which intensity
increased as a result of the latest recession. The intensity of total consumption fell by approximately 25%
in 1994–2010 and the intensity of end-use by 22%.
The household sector accounted for 22% of Finland’s total energy end-use in 2010. Energy consumption
in the household sector was approximately 70 TWh according to the national statistics in 2010. According
to the ODYSSEE database, the consumption of the residential sector was slightly lower, 5.4 Mtoe, which
excludes energy used in summer residences and electricity used by the real estate sector (common areas of
blocks of flats). The current consumption levels correspond to an increase of 36% compared to energy
consumption in 1995. However, the cold winter of 2010 had a significant impact on the increase
accounting alone as much as 12 percentage points of the growth. Approximately 60% of energy is used
for heating, roughly 15% for hot water production and about 15% for electricity for appliances and
lighting. The rest is used in saunas (recently included in heating in the national statistics) and holiday
homes. Total consumption in this sector can be calculated from 1995, because there is no information
concerning the consumption of heating in the years prior to that. Electricity consumption in the
household sector was approximately 24 TWh in 2010, including household electricity (10.3 TWh),
electricity for heating, electricity consumption of holiday homes, and electricity use by real estates.55
The energy industry has been the biggest investor of all industries in Finland for years. According to the
investment survey published last week by the Confederation of Finnish Industries (EK), the situation will
remain unchanged. While EK estimates investments in manufacturing industry not to exceed EUR 3.2
billion in the current year, energy investments alone are estimated to reach EUR 1.9 billion. In 2012
energy investments are estimated to have dropped a little, from EUR 1.5 billion to EUR 1.4 billion or
fewer than 8 percent, but brisk growth is thus forecast again for this year56.
Energy sector investments can be implemented according to plan, if it has a stable operational
environment at its disposal not burdened by new, extra taxes, such as the windfall tax. License processes
must also be made more flexible than they are at present. The feeling in the sector is that energy
investments and their financing are already subject to considerable political risk, which should be lowered
to smooth the way for investments in the coming years and decades. Over the next 15 years, estimated
power and DH production and network investments will reach about EUR 25-30 billion in total.
8 companies provide ESCO services as of 2009, where 4 are actively participating in the market and 4 are
only occasionally undertaking ESCO projects. All ESCO business units identified are composed by up to
50 employees where two national and two subsidiaries of multinational corporations dominate the market.
The ESCOs present in Finland are part of manufacturers of building automation & control systems,
facility management and operation and control companies, and consulting/engineering firms.
Finland has many energy intensive industries such as paper and pulp production, chemical industry and
metallurgic facilities. Most projects are developed in the industrial sector followed by complex building
projects in the public sector. As a result of tightening budgets of local authorities, a growth has been
noticed since 2009 in the number of municipalities contracting ESCOs. The most common type of
contract is EPC in which both guaranteed savings are used and shared savings. The typical sources of
financing for ESCO projects are local commercial banks. Government subsidies are also often included as
a source of financing.
55 http://www.odyssee-indicators.org/publications/PDF/finland_nr.pdf
56 http://energia.fi/en/topical-issues/lehdistotiedotteet/energy-year-2012-electricity-upturn-electricity-consumption-due-co
- 28 - | Page
The Finish government subsidises (depending on the specific project) 15-30% of the investments carried
out by ESCOs. Work has also been done in dissemination and marketing to decrease the mistrust of
clients and increase the knowledge of the ESCO services. In line with Finland's National Energy and
Climate strategy, the sectoral Energy Efficiency Agreements for 2008-2016 has been started. By
subscribing, companies and communities commit to plan, implement and monitor energy efficiency
measures. In compensation signatories can apply for subsidies to implement their action plans. The
framework agreements especially important for the ESCO market are the Energy Efficiency Agreement in
Industries, the Municipal sector Agreement and the Höylä III Energy Efficiency Agreement. The
Municipal sector agreement specifies the use of savings guarantees and/or funding procedures in the
implementation of investments, as an operational target and measure of the municipality. Municipalities
are encouraged to use ESCO services to implement investments in the procurement of energy efficient
systems and appliances, which can be carried out regardless of the rest of the investment budget.
Municipalities shall also ensure the removal of obstacles for the use of ESCO services in own
administrative and decision making processes and that their personnel is competent to enter ESCO
contracts.
Municipalities are also invited to take into account the possibility of using ESCO services when the lack
of funding prevents the implementation cost effective investments (Energy Efficiency Agreement
between the Ministry of Trade and Industry and the Municipality 2008). No big changes in the business
volume have been noticed in ESCO market growth. The market in 2009 was reported to have stayed at
the 2007 level. The Energy Services Directive has been identified as a driver to "activate" the market.
Other identified drivers are the increasing cost competition, the need to improve cash flows, CO2 limits,
the need for off-balance investments and the necessity to change lighting systems. Recommendations
from the national Energy Efficiency Committee, the Energy Efficiency Agreements and the governmental
subsidy to ESCOs are also identified as important drivers. The financial downturn related to the
investment budget has been identified as one of the most common barriers to ESCO projects, followed
by mistrust from the clients, insufficient knowledge and the lack of sufficient competitiveness of current
concepts to meet the customers' needs. The credit risk for clients (especially in some industrial branches)
has also grown due to the financial crisis making it harder to get financing from financial institutions.
An explanation for the slow growth is that the learning effect on the customer side has compensated the
negative pressure on the financial market. The potential size for the ESCO market in Finland can be
roughly estimated to be around €20 million yearly. In order to increase the competitiveness in comparison
to other solutions and meet customers' needs, the development of service concepts better suited to the
local market is necessary.
Business models in Finland
The funding comes from the Ministry of Employment and the Economy, with the aim of disseminating
information about the ESCO service to all energy users in industry and service sectors, who are the target
groups/clients, especially people in the municipal sector who work on energy efficiency and procurement.
The financing for the project has been approximately 12-15 man days per year over ten years.
The service offers: ESCO seminars for ESCOs and potential clients, ESCO project register, ESCO
marketing material e.g. guidelines, brochures and articles about ESCO services, information dissemination
and contacts to separate studies about ESCO services.
ESC is not a well-known concept and the awareness about the model is low. An important reason for this
is the well built-out DH system.
In July 2012, YIT and RWE Energiedienstleistungen signed a strategic collaboration agreement. The
partnership will allow two companies to respond promptly and comprehensively to technically demanding
customer queries in the field of energy supply contracting. YIT sates that the partnership has been
prompted by the ongoing transition in the energy sector, and the concept of contracting has taken on a
- 29 - | Page
key role in both economic and environmental terms. Energy-efficient technologies enable the client to
offer both affordable prices and eco-friendly energy. With the partnership, YIT is expanding its service
packages which offer energy efficiencies and reduced energy costs in commercial and industrial
properties. Its individual elements range from efficiency inspections of technical systems and ongoing
optimisation of operations, to energy saving contracting57.
EPC - Public awareness of EPCs and energy efficiency improvement has increased in Finland over the
years. Today, the most important barriers to energy efficiency improvement in the interface between
industry and its service providers relate to principal agent problems. These problems could be overcome
by investing in energy performance measurement in industry and by developing a more analytic and
discussion-oriented investment project culture led by skilled in-house personnel58.
EPCs have not been used in Finland to the same degree as in other countries for a number of reasons.
Extensive use of energy audits, funded in part by the government, and the “Voluntary Energy
Conservation (Efficiency) Agreements” identified many energy conservation measures with paybacks of
less than 2 years. Over two-thirds of these projects in public buildings have been implemented internally
by the public agencies. In a sense, this has resulted in improvements capturing the “low hanging fruit”
leaving only energy conservation measures that are difficult to implement successfully through an EPC.
EPCs have been used profitably for energy savings in high investment energy efficiency improvements in
industrial processes, such as heat recovery during air compression. Finland, unlike other participating
countries, estimates energy savings at the process level instead of by estimating reductions in annual
energy consumption for an entire building. Finland also perceives that most EPCs in Canada, Germany,
and the United States are incorporated as part of general renovations of public buildings. Energy
efficiency improvements in public buildings in Finland have not been coupled to general renovations and
thus are more expensive to implement and less attractive to energy service providers59.
57 http://www.goodnewsfinland.com/archive/news/yit-and-rwe-join-forces-in-energy-supply-contracting/
58 http://www.aidic.it/cet/10/21/055.pdf
59 http://www.ecbcs.org/docs/Annex_46_ESPC_Best_Practices.pdf
- 30 - | Page
Norway
In 2009, the market had 5-10 active companies with €25 million in turnover compared to 2007, when the
market had an estimated value of €30-€40 million in turnover and included 10-15 companies
Subsidiaries of international companies and local manufacturers of building automation & control
systems, facility management and engineering consultancies are active on the market together with
ventilation entrepreneurs (who only recently entered the market). The majority of the ESCO projects
carried out involve public buildings; the share of projects carried out in private non-residential buildings is
lower. During 2007 – 2008, most projects were developed in the industrial sector. A smaller number of
projects (but with a significant market value) involve building refurbishment and modernisation projects.
Projects are mainly carried out with contract energy management agreements although energy
performance contracts with guarantied savings are also offered. A small number of projects use shared
savings with and without financing options. Projects are funded both by clients and ESCOs with internal
funds or bank loans. In 2008 the Norwegian state allocated approximately €45 million for energy
efficiency improvement investments to be spread over 2-3 years.
EU co-financed projects (such as Eurocontract and the European Energy Service Initiative) and
marketing efforts are perceived as driving factors of the ESCO industry. Public procurement rules pose
barriers to ESCO projects. Although financing ESCO projects has previously not been reported as a
problem in Norway (EC DG JRC 2007), in 2009 the lack of appropriate forms of finance is considered to
be the main barrier for project development. Mistrust from clients combined with the lack of time and
skills among building owners in energy efficiency measures is lowering the attractiveness of ESCO
projects.
The focus from national energy authorities on EPC is considered very low and a significant increase in
energy prices for the industry and building owners is deemed essential in order to raise the priority of
energy efficiency investments. The energy certification of buildings is expected to boost further energy
efficiency improvement investments. More efforts and best practices are needed in order to further
increase the knowledge and understanding of ESCO.
Business models in Norway
EPC - The Norwegian EPC market is immature and small. There have been sporadic occasions of EPC
or similar projects over the last 15 years. Various companies have offered versions of “energy saving with
guaranteed results”, but the market response has not been high. Some pilot projects on outsourcing or
result based contracts have been initiated through an EU/SAVE project, mainly in the private sector, but
the contents differ from the EPC concept as defined by EESI.
Low energy prices over the last few years and expected for the coming years result in low interest in
energy measures, and the recent finance crisis has lead to less interest from the banking sector. Focus on
climate both in media and in municipalities through Climate plans (not mandatory but strongly
encouraged) however leads to focus on energy use in public buildings, where EPC can be a strong tool.
The main barriers are lack of knowledge, time and trust in EPC. Establishment of EPC projects is time
demanding. Marketing of success stories and templates and training will counteract these, and funding for
project establishment would be a strong positive force in developing the market60.
60 http://www.fedarene.org/documents/projects/EESI/Country_report/Country_Report_Norway.pdf
- 31 - | Page
Identification and analysis of ICT-based heating solutions
According to European Association of Energy Service Companies, there are many municipalities and
companies benefiting from the ESCOs. Unfortunately there is no or little information about the energy
management systems/platforms used by ESCOs.
According to Greentech Media, Schneider Electric is rectifying the hole in its portfolio with an update to
its Wiser home energy management platform, which was released in 201161. Also, they state that
Schneider has a pilot with a municipal utility in USA. The company is also working with contractors and
builders, including KB Homes. Although home energy management is relatively new, Schneider already
has a deep portfolio of energy controls for the commercial and industrial sector and has partnered with
startups like BuildingIQ to bring additional intelligence to its efficiency offerings. Many of the
functionalities are similar to other offerings: a web portal to see energy use, get energy tips, control the
thermostat from a mobile device and compare energy usage to peers. The gateway connects to the home’s
router and the hardware within the home communicates over ZigBee.
The following points highlight the different ESCO cases. First, overview of the companies offering
energy contracting services and software and hardware solutions to the market will be given. Secondly,
technological cases using ICT solutions are described and thirdly, examples of different ESCO business
models are brought out.
Companies offering software and hardware solutions

According to a recent report from Pike Research62, the ESCO industry is now in the midst of a
transformative period, the outcome of which will be a dramatically different competitive arena. The
cleantech market intelligence firm expects that, following this period of change, equipment manufacturers
will emerge as the most significant winners of the market share battle.
Although equipment-affiliated firms usually use performance contracting as a sales channel for their
products, bigger equipment-affiliated companies like Schneider Electric, Honeywell, Johnson Controls,
Siemens and EnerNOC act also as ESCOs and offer energy contracting services and software and
hardware solutions to the market. The solutions made by big equipment manufacturers are usually closed
and furthermore, they do not offer their solutions as off-the-shelf software, providing market participants
with an open marketspace.
Schneider Electric
Website: www.schneider-electric.com
Turnover: 24 billion EUR in 2012
Number of employees: 140 000 (2012)
Schneider Electric SA is a France-based multinational corporation that specializes in electricity
distribution, automation management and produces installation components for energy management. As
a global specialist in energy management with operations in more than 100 countries, Schneider Electric
offers integrated solutions across multiple market segments, including leadership positions in Utilities &
Infrastructure, Industries & Machines Manufacturers, Non-residential Building, and Data Centers &
Networks and in Residential.
61http://www.greentechmedia.com/articles/read/schneider-electric-pushes-into-home-energy
62http://www.navigantresearch.com/newsroom/building-equipment-manufacturers-will-continue-to-gain-market-share-in-the-energy-
service-company-market
- 32 - | Page
StruxureWare™ software63
StruxureWare™ software is a platform
of applications and suites that gives
visibility into energy and other resource
use across the organization.
StruxureWare™ software offers
software applications for different
purposes:
Sustainability Planning helps to view
energy and sustainability issues
strategically, ensuring that all decisions
support enterprise’s financial and
operational integrity. Figure 8. Struxureware Energy Management
 StruxureWare Resource Advisor is an online carbon and energy reporting portal. This enterprise
level software-as-a-service (SaaS) tool allows end users to visualize energy cost and resource usage
data, capture and report carbon emissions accurately, and manage all energy efficiency projects in
one convenient location.
Energy Management helps to aggregate energy data into a single view to support energy efficiency
initiatives.
 StruxureWare Energy Operation is a flexible software-as-a-service (Saas) tool that offers scalable
functionality from simple, out-of-the-box reporting to in-depth energy analytics. This tool
transforms data into essential energy information to identify areas of continuous improvement
and reduce operating expenses.
Business Operation helps to maximize
business performance and enhance operational
efficiency throughout client’s facilities and
processes.
 StruxureWare Building Operation is an

intelligent building management
software platform that provides
integrated monitoring, control, and
management of energy, lighting, fire
safety, security and HVAC.
 StruxureWare Plant Operation is an
operations management software Figure 9. StruxureWare Building Operation
solution used to identify and improve
plant effectiveness. It helps organizations improve their competitiveness by reducing costs,
increasing operational efficiencies, reducing losses, and optimizing energy consumption.
 StruxureWare Data Centre Operation takes a modular approach to connecting the business
processes of Data Centre Infrastructure Management with the physical facility and IT
infrastructure. The modules seamlessly integrate context-relevant monitoring, detailed modelling
and forecasting, and user workflow-oriented ‘what if’ planning tools for data centre and IT asset
management, capacity, change, and energy management activities.
Power Availability helps to protect the business from damage and disruption due to power outages or
quality issues.
63 http://www.schneider-electric.com/site/struxureware/
- 33 - | Page
 StruxureWare PowerSCADA Expert is a complete real-time monitoring and control software
solution for large facility and critical infrastructure operations. It provides real-time data
intelligence for power distribution through alarming and graphical interface functions.
 StruxureWare Power Monitoring Expert is a complete supervisory software package for power
management applications. The software collects and organizes data gathered from a facility’s
electrical network and presents it as meaningful, actionable information via an intuitive web
interface.
Process Control helps to drive production performance and ensure operational safety through facility
processes.
 StruxureWare Process Expert is the software that integrates the control application, the
supervision, and the field devices in a single environment and helps configure your entire control
system.
 Streamlined control and monitoring of building management system from mobile devices.
 StruxureWare Data Centre Expert provides an efficient way for organizations to monitor their
company-wide, multi-vendor physical IT infrastructure: power, cooling, security, and
environment. Real-time device monitoring, user-defined reports and graphs, instant fault
notification, and alert escalation enable quick assessment and resolution of critical events that
could adversely affect IT infrastructure availability.
Honeywell
Website: www.honeywell.com
Turnover: 28.3 billion EUR (37.6 billion USD) in 2012
Number of employees: 132 000 (2012)
Honeywell is a Fortune 100 diversified technology and manufacturing leader, serving customers
worldwide with aerospace products and services; control technologies for buildings, homes and industry;
automotive products; turbochargers; and specialty materials. Honeywell Building Solutions is part of the
Honeywell Automation and Control Solutions business group, a global leader in providing product and
service solutions that improve efficiency and profitability, support regulatory compliance, and maintain
safe, comfortable environments in homes, buildings and industry.
Honeywell Attune™ Advisory Services64
Honeywell Building Solutions introduced its
Attune™ Advisory Services in March 2012.
Attune™ Advisory Services is a suite of
services that combines cloud based tools
and analytics to provide facility managers
with information they can use to reduce
utility bills and operational expenses. Attune
Advisory Services helps building owners and
facility managers wherever they are on the
energy- and operational-efficiency spectrum,
providing technology and support to gain
baseline awareness of building performance,
make improvements to reduce energy and Figure 10. Attune™ Energy Dashboard
operations costs, and define an on-going
strategy to manage and optimize a facility65.
64https://buildingsolutions.honeywell.com/HBSCDMS/attune/
65https://buildingsolutions.honeywell.com/HBSCDMS/attune/pdfs/HONE50_3718_SL53-
2390%20Attune%20Advisory%20Services%20Overview%20Brochure%200405.pdf
- 34 - | Page
Attune Advisory Services from Honeywell offers three levels of assistance across both energy and facility
operations — Awareness, Improvement and Optimization — with programs focusing on either energy or
operational efficiency. The energy focused services include66:
Attune Energy Awareness enables facility managers to access and monitor electricity and natural gas
consumption using a Web based, Software-as-a-Service (SaaS) dashboard (a web-based Energy
Dashboard will be set up that provides means to understand building’s energy consumption and enables
up to 3% energy savings) that collects information from utility meters to provide insight on building
performance and create a baseline to help identify savings opportunities. Honeywell also provides lobby
signage that allows organizations to showcase the results of efficiency efforts (Energy Awareness Lobby
Signage uses existing infrastructure (Honeywell BMS and data already tracked by facilities) and creates an
animation on energy use).
Attune Energy Improvement turns building data into actionable recommendations with the advice of
Honeywell analysts. Facility managers receive periodic reports that provide information on efficiency
opportunities with related recommendations on upgrades and replacements. The improvement level
consists of web-based and emailed energy reports based on sub metering key plant and diagnosis and
advice help to improve building performance. Building retrofits made as a result of these services can
deliver energy savings of up to 10%.
Attune Energy Optimization delivers a combination of improved building knowledge and actionable
recommendations, backed by monitoring, measurement, and verification to help ensure facilities operate
at their peak. Attune Advisory Services follows three steps approach in Energy Optimization:
 ASSESS, which collects energy and building information, creates a performance baseline, and then
recommends operational and equipment improvements;
 OPTIMIZE, which generates lists of actionable recommendations and;
 SUSTAIN which validates the results of recommendations that have been implemented.
The optimization level consists of granular diagnostics based on control points and metering in order to
remotely diagnose the building performance. Optimization can deliver energy savings of 10% to 20% on
average, with the potential for even greater savings in older facilities.
Honeywell plugs into a building to gather systems data and assess performance using cloud based fault
detection and diagnostics. Local service technicians collaborate with a team of optimization experts to
review the findings and present a plan to help facility managers reduce utility consumption. On-going
assessment and monitoring allow managers to see that upgrades continue to deliver results67.
EnerNOC
Website: www.enernoc.com
Turnover: 216 million EUR (286.6 million USD) in 2011
Number of employees: 599 (2011) in 16 subsidiaries in 5 countries around the world
EnerNOC is among the largest providers of energy management equipment and services for commercial,
institutional, and industrial customers, as well as electric power grid operators and utilities. It provides
demand response services that maintain real-time balance between electricity supply and demand.
EnerNOC energy management services provide solutions for energy conservation and efficiency, in
addition to consulting services for energy supply management. These services may also reduce greenhouse
gas emissions in many cases, also providing the opportunity for its clients to earn renewable energy
credits.
EnerNOC helps commercial, institutional, and industrial organizations use energy more intelligently, pay
less for it, and generate cash flow that benefits the bottom line through complete suite of technology-
66 http://www.fm-expo.com/files/building_management_solutions_by_honeywell.pdf
67 http://www.todaysfacilitymanager.com/2012/07/new-service-spotlight-attune-advisory-services-from-honeywell
- 35 - | Page
enabled energy management solutions including their EfficiencySMART, DemandSMART and
SupplySMART solutions.
EfficiencySMART – EnerNOC’s
EfficiencySMART™ solution delivers
continuous energy savings by
leveraging the powerful combination
of the energy management expertise,
advanced technology platform, and
energy market access of EnerNOC.
EfficiencySMART™ helps automate,
scale, and target the highest ROI
energy savings opportunities.
EnerNOC helps to cut energy costs,
while maintaining or improving
productivity. EfficiencySMART
addresses the entire lifecycle of energy
efficiency needs from planning to
implementation to measurement and Figure 11. EfficiencySmart energy management software
verification68.
The EfficiencySMART solution offers:
 More control over energy spend

 More strategic deployment of critical resources and man hours
 More competitive edge
 More savings
DemandSMART – EnerNOC's web-based application, DemandSMART, enables commercial, industrial,
and institutional entities to receive payments for participating in demand response programs. EnerNOC
offers opportunities in more energy markets than any other provider, including the capacity, price-based,
and ancillary services markets. Comprehensive demand response application enables commercial,
institutional, and industrial organizations to maximize new sources of revenue and stabilize the electric
grid by participating in demand response programs globally. DemandSMART also gives users the ability
to identify energy savings opportunities through on-demand access to basic energy data69.
SupplySMART – EnerNOC’s energy price and risk management application and service assesses a
customer’s energy purchasing options and associated risks. Using a competitive bid process, EnerNOC’s
SupplySMART delivers recommendations on energy prices, terms, and conditions that deliver the best
value to the customer. SupplySMART includes a rich set of on-demand features that enable users to
centralize and track utility bill and enterprise-wide utility financial information (e.g. budgets, forecasts),
and assess bill accuracy and savings opportunities70.
68 http://www.enernoc.com/for-businesses/efficiencysmart
69 http://www.enernoc.com/for-businesses/demandsmart
70 http://www.enernoc.com/for-businesses/supplysmart
- 36 - | Page
Johnson Controls
Website: www.johnsoncontrols.com
Turnover: 31.6 billion EUR (41.955 billion USD) in 2012
Number of employees: 170 000 (2012) in 1,300 locations
across six continents
Johnson Controls, Inc. is an American company globally offering products and services to optimize
energy and operational efficiencies of buildings, automotive batteries, electronics and interior systems for
automobiles. It is a Fortune 500 Diversified, multi-industrial, multinational conglomerate with 170,000
employees in more than 1,300 locations across six continents. Johnson Controls has an annual sales
turnover of 31.6 billion EUR in 2012, with building efficiency being almost a 9.8 billion EUR (13 billion
USD) business for Johnson Controls.
Panoptix solution71
An end-to-end, cloud-based solution
called Panoptix was introduced by
Johnson Controls in October 2011.
Panoptix delivers building efficiency
applications in a “pay-as-you-go”
software-as-a-service (SaaS) model.
The Panoptix solution is a combination
of software and services to help single
building owners or managers of global
enterprises improve the performance of
their buildings, decrease energy use and
operational costs, and reduce greenhouse
gas emissions. It is driven by cloud- Figure 12. Panoptix operation dashboard
based apps that provide visibility into how every system, subsystem and device is functioning, and
provides information to take actions to
improve their performance.
Panoptix can be layered onto any
building automation system -- including
Johnson Controls’s flagship efficiency
system, Metasys -- to harness data and
analyze it using what the company
anticipates will be a growing number of
apps, including:
 Panoptix Continuous
Diagnostics Advisor
application constantly monitors
building systems to detect Figure 13. Panoptix applications
problems that waste energy and
impact tenant comfort, helping users to optimize operational performance, identify cost and
energy efficiencies, and predict maintenance needs72.
 Panoptix Carbon and Energy Reporter application tracks utility spend and the carbon impact
of a building based on utility bills, enabling users to compare building energy usage against
industry standards and other like buildings through customizable data reports. Carbon and Energy
Reporter tracks energy usage and carbon emissions across an enterprise. It tracks utility
consumption spending as well as carbon emissions impact based on utility bills and allows site
71 http://www.johnsoncontrols.com/content/us/en/products/building_efficiency/building/panoptix.html
72 https://whatspossible.johnsoncontrols.com/servlet/JiveServlet/previewBody/1051-102-7-1020/JCI_Panoptix%20CDA.v17.pdf
- 37 - | Page
owner to compare and benchmark multisite operations to external data, including industry data
and similar buildings73.
 Panoptix Energy Performance Monitor application helps quantify the savings generated from
energy efficiency projects based on benchmarked energy reduction forecasts74. Energy
Performance Monitor provides flexible trend analysis to compare facilities, investigate problems
and report performance. It also facilitates access to data aggregated from multiple applications and
sources such as building systems, weather, utility bills and meters and illustrates spikes in energy
consumption to help diagnose the cause of increases in energy usage.
 Panoptix Custom Analyzer application enables to configure and review building data to meet
different needs. Custom Analyzer provides flexible trend analysis to compare facilities, investigate
problems and report performance and facilitates access to data aggregated from multiple
applications and sources such as building systems, weather, utility bills and meters. It also
illustrates spikes in energy consumption to help diagnose the cause of increases in energy usage75.
Panoptix adds two other dimensions that are seldom seen in building performance systems -- a staff of
Panoptix experts who provide "live guide support" to customers and a home base for an online
community of Panoptix customers.
Johnson Controls is currently working with BuildingIQ (an energy management software company) to
offer Predictive energy Optimization™ through Panoptix™Platform. Using Panoptix, Johnson Controls
customers will be able to access BuildingIQ to automatically reduce energy consumption and costs while
improving the operational efficiency of a building and facility managers.
BuildingIQ offers a unique, next generation service to automatically fine tune the building management
system (BMS) based on weather forecasts, occupancy patterns and energy prices in order to optimize
HVAC energy. The Panoptix Platform will provide cloud-based access to energy data and manage the
interface to the BMS to streamline the implementation of BuildingIQ for customers across their
portfolios. Customers will be able to purchase a monthly subscription to BuildingIQ through Panoptix as
well. BuildingIQ will be the first application on Panoptix to enable real-time control of the BMS in order
to directly reduce energy use and peak loads.
Siemens
Website: www.siemens.com
Turnover: 73.5 billion EUR in 2011
Number of employees: 360 000 (2011) in 190 countries
Siemens AG is a German multinational engineering and electronics conglomerate company headquartered
in Munich and Berlin, Germany. It is the largest Europe-based electronics and electrical engineering
company. Siemens' principal activities are in the fields of industry, energy, transportation and healthcare.
It is organized into five main divisions: Industry, Energy, Healthcare, Infrastructure & Cities, and Siemens
Financial Services.
73 https://whatspossible.johnsoncontrols.com/servlet/JiveServlet/previewBody/1042-102-8-1606/JCI_Panoptix%20Carbon.v7.pdf
74 https://whatspossible.johnsoncontrols.com/servlet/JiveServlet/previewBody/1031-102-10-2335/JCI_Panoptix%20CA.v6.pdf
75 https://whatspossible.johnsoncontrols.com/servlet/JiveServlet/previewBody/1031-102-10-2335/JCI_Panoptix%20CA.v6.pdf
- 38 - | Page
Apogee™76
The Siemens Apogee™ Building
Management System is used in
commercial, industrial, resi-
dential and governmental buil-
dings to create a central com-
puter controlled method of
controlling, monitoring and
optimizing operations such as
heating, air-conditioning, lighting
and security. The primary benefit
of the product is to enable
streamlined facility operation and
reduced energy usage.
The Apogee Building
Automation System offers Figure 14. System Architecture for the Apogee Building
options like: Automation System
 Integrate multiple building systems no matter the manufacturer or installer

 Achieve greater flexibility through open protocol interoperability
 Expand, upgrade, optimize your facility systems
Apogee is a forward thinking system providing maximum flexibility and options for customers into the
future. It contains quality Siemens equipment throughout and also provides a high level of functionality
and performance.
Some highlights of Apogee include77:
 Investment protection through backwards compatibility guarantee

 Forward thinking system constantly evolving to keep pace with technology changes
 Supports open protocol standards (BACnet, OPC, TCP/IP, LonWorks, Web, Modbus, Terminal
Services)
 Remote communication options (Dial up, Terminal Services, Web browser with APOGEE® GO,
Pagers, Phone, SMS and email with RENO)
 Information management with Report Builder or InfoCenter Suite
 Excellent scalability i.e. from the smallest to the largest facility with modular expansion
throughout
 Integration capability of communicating with hundreds of other building systems, devices,
controllers and networks from hundreds of different suppliers
76 http://w3.usa.siemens.com/buildingtechnologies/us/en/building-automation-and-energy-management/apogee/Pages/apogee.aspx
77 http://www.hqs.sbt.siemens.com/gip/general/dlc/data/assets/hq/APOGEE--Building-Automation_A6V10301530_hq-en.pdf
- 39 - | Page
ICT-based case studies
Below is the information on some European projects. ICT based systems are very new to the market and
have just reached a piloting stage (HOMES, E3SoHo, eSESH, BECA, SHOWE-IT, ICE-WISH). To our
best knowldege, no large-scale commercial projects have been implemented this far.
HOMES project78
Lead by Schneider the HOMES collaborative innovation programme is designed to create solutions for
achieving optimal energy performance in all buildings. The four-year (2008-2012) programme was
supported by the French Agency for Innovation (OSEO). Its thirteen members were manufacturers and
researchers with synergistic expertise in building management: CEA79, CIAT80, CSTB81, Delta Dore82,
EDF83, Idea84, Philips Lighting85, Radiall86, Schneider Electric87, Somfy88, STMicroelectronics89, Watteco90
and Wieland Electric91. Together, they designed solutions to optimize energy use, diversify energy sources,
and sustain energy performance and facilitatethe deployment of energy management systems in new and
existing commercial and residential buildings in Europe. HOMES is a tried-and-tested method for
designing and renovating buildings. The method includes:
 Measuring the building’s effective performance in order to set up an improvement plan -
Measurement of the effective performance of buildings is a prerequisite for any improvement
initiative. This consists of measuring actual energy consumption (understanding the discrepancies
between the promises of conventional calculations and reality, taking account of all the consuming
equipment) and the building’s conditions of use (understanding the services provided by the
energies consumed, taking account of the occupants and their activity, external weather
conditions, etc.).
 Implementing multi-application control solutions in each zone - Control by zone (and
ideally by room) is the most effective solution to reducing a building’s energy demand. This also
makes it possible to adapt to the occupants’ uses and provides buildings with excellent flexibility
(in the event of a change of occupants, tenants, use of a room, installation of partitions, purpose,
etc).
 Designing Human-Building Interface solutions - HOMES is experimenting with Human-
Building Interface solutions for everyone involved (occupants, managers, maintenance managers,
owners) in order to achieve the best compromise between fully-manual and fully-automatic
systems. Whereas fully-manual buildings are energy-intensive, fully-automated buildings are a
source of anxiety as the slightest deviation or failure can cause disruption. Human-Building
interfaces are there to make energy data more easily accessible and understandable, while allowing
human operators a degree of autonomy and decisionmaking in the building management process.
 Making the building of tomorrow not only smart, but also obedient - The occupants
determine the perceived comfort conditions in their environment when they enter a room, using a
single control. In return, they receive information indicating the energy consequences of their
actions. The zone controller optimizes the building’s consumption consistent with this choice. As
soon as the occupants leave the room, the zone controller chooses the environmental setpoints to
place the room in an energy idle state. The occupants do not have to make decisions about
environmental parameters they cannot perceive: the zone controller optimizes them automatically.
78 www.schneider-electric.com/documents/press-releases/en/shared/2011/11/20111123_DP_HOMES_EN.pdf
79 www.cea.fr
80 www.ciat.fr
81 www.cstb.fr
82 www.deltadore.com
83 edf.com
84 www.ffie.fr
85 www.philips.fr
86 www.radiall.com
87 www.somfy.fr
88 www.schneider-electric.com
89 www.st.com
90 www.watteco.com
91 www.wieland-electric.com
- 40 - | Page
 Developing design tools for the industry sector - HOMES develops design tools for the
industry sector that can avoid data re-entry and save time, prevent data loss and improve the
understanding of all those involved.
The HOMES program uses different sensors (Wireless battery-less comfort sensor, Multi-application
zone controller: Roombox, High-energy efficient HVAC emission controller) and simulation models
(Simbad simulation tool). During the HOMES project, five pilot cases were selected. A variety of
buildings are involved (offices, hotels, schools and residential buildings), new or existing, possibly
refurbished, covering a surface area between 500 and 3000 m². Two of them are equipped with heat
pumps, two others with gas-fired boilers, and the last one with a fully-electric system. In addition to the
type of building, the HOMES program is also keen to work in as many varied climates as possible
(Mediterranean, Atlantic coast, mainland, mountainous regions). They defined 150 control functions
intended for multi-application zone controllers, including:
 “Zone” functions: to reduce energy demand in each room - For each zone, they control local
equipment based on data gathered by local sensors to provide the expected service;
 “Equipment” and “production or distribution equipment” functions: to optimise energy
supply in each vector to cater to these needs - They control and optimise the production or
distribution equipment by adjusting the operating modes at any moment based on requirement
and consumption information fed by the zone control functions. They make it possible to supply
energy to the distribution terminals and optimise the manner in which the energy is transported,
based on the principle of “just necessary”.
 “Energy” functions: to control energy sources that feed energy vectors by giving priority
to free gains and renewable energies - They optimise the building’s overall consumption
balance:
o based on tariffs
o based on their environmental impact (minimising CO2 emissions and kWh)
They control the building’s storage and release capacities to contribute to peak shaving, or to
participate in the capacity market (service functions in relation with the outside of the building, in
smart cities or smart grids).
Results obtained from each of the pilot sites
Two different simulations were conducted on each of the pilot sites. These reproduced:
 Actual operation (including manual actions)
 Automatic operation applying the HOMES control strategy
Montbonnot primary school

Site manager: Schneider Electric
Installation contractor: Realiss
56% of energy consumption saved using active control solutions
Improvement drivers: Equipment (heating and ventilation) controlled according to the occupancy level
(very intermittent occupancy).
Savoie Technolac office building

Site manager: CEA
Installation contractor: Perrin Electric
Improvement drivers: Optimized management of lighting (switching off when employees are absent,
adjusting the light level needed when they are present) and other uses of electricity (equipment set to
standby at night and weekends).
3-star hotel in Nice

Site manager: Watteco
Installation contractor: Le Confort Electrique
- 41 - | Page
Improvement drivers: Optimized management of heating according to the occupancy level and
ventilation according to the data from the CO2 sensors.
Hotel in Carcassonne
Site manager: EDF
Installation contractor: Michel Chiffre SARL
Improvement drivers: Optimized management of heating according to the occupancy level and
ventilation according to the data from the CO2 sensors.
Residential apartment block at Vaux-sur-Seine

Site manager: CSTB
Installation contractor: Electen
Improvement drivers: Optimized management of heating according to the occupancy level, ventilation
according to the data from the CO2 sensors and lighting according to requirements (this parameter is
linked to opening/closing of roller blinds so as to benefit from natural light).
E3SoHo project92
The overall objective of E3SoHo project is to implement and demonstrate in 3 Social Housing pilots an
integrated and replicable ICT-based solution which aims to bring about a significant reduction of 25% of
energy consumption in European social housing by providing tenants with feedback on consumption and
offering personalised advice for improving their energy efficiency, reducing the energy consumption and
increasing the share of RES (Renewable Energy Sources) by informing and supporting the user to decide
for the most appropriate behaviour in terms of energy efficiency, cost, comfort and environmental
impact, monitoring and transmitting consumption data to Energy Services.
The proposed service offers a holistic solution that provides advice on how to reduce energy
consumption, the installation of the system accordingly, and the monitoring and tuning of energy the
consumption. The proposed service will tailor, install and tune an ICT based system that will significantly
reduce the energy consumption and will enable an improved management of energy production systems
already installed in the building.
Therefore, the E3SoHo service is built up of the following sub-services that can be provided separately:
 Perform an audit in the building to identify the energy saving potential.
 Provide the owner with an ICT based blue-print to reduce the energy consumption.
 Implement the system according to the blue-print
 Tuning of energy consumption by monitoring
 Maintenance of the installed system.
The E3SoHo will be demonstrated within three clusters of Social Housing developments in three
European countries (more than 400 estimated users). Locations:
Zaragoza, Spain93
(Social Housing Building with 43 dwellings for renting; estimated number of users: 120)
Main objective was to deploy, test and evaluate the integrated solutions based on ICT to improve energy
savings and energy awareness consumption in new development of Social housing. The pilot will:
- allow an improvement of the follow-up and exploitation of the building (HVAC, lighting, etc);
92 www.e3soho.eu/spip.php?article1
93 www.e3soho.eu/spip.php?article18
- 42 - | Page
- exhibit interfaces that are “highly-communicating” (friendly) to the stakeholders;
- in fine provide with a kind of show-room in Spain for ICT support to EE in social housing.
The pilot should also give the opportunity to better define the way forward to developing consultancy
services in innovation related to ICT-based EE in new built social housing and beyond.
Service description
 The boilers as well as the central cooling unit will be managed by an intelligent management
system. This system will be integrated in a Central control unit which will control the lighting
system.
 The sensors needed for the intelligent system performance (Light level, Presence detection,
Temperature, Humidity, Air flow, etc) will be installed within dwellings.
 The management of the Solar Thermal Collectors will be also provided from the central unit.
 Smart meters will be installed in the dwellings with the solution implemented to monitor the
energy consumption of the dwellings.
 Dwellings with the ICT solution implemented will be interconnected among them through a
network that at the same time will be connected to internet.
 In addition, the monitoring will be also carried out in dwellings without the ICT solution installed
by means of traditional electricity meters.
Innovative aspect
 Increased energy awareness, e.g. smart meters can provide users with direct feedback on costs and
environmental effects of their consumption. Studies show that this leads to a reduction in
electricity consumption of 5% to 15% and fosters the appreciation of electricity as a valuable
good.
 New products and services, integrating smart meters, energy-aware devices and tools for energy-
consumption awareness, as well as potential for future automated energy audits.
 Opportunity for enhanced incentive schemes, with high resolution data on energy consumption
enables novel energy pricing and bonus schemes. If designed properly, these incentive systems can
unfold a positive effect on peak load and absolute consumption – and help to integrate the user in
the overall strategy.
Warsaw, Poland94
(Social Housing Building with 48 dwellings for renting; Estimated number of users: 111);
savings and energy awareness consumption in Social housing with a focus on renovation. The pilot will:
 demonstrate solutions to improve energy audit;
 allow an improvement of the follow-up and exploitation of the building (HVAC, lighting, etc);
 exhibit interfaces that are “highly-communicating” (friendly) to the stakeholders;
 in fine provide with a kind of show-room in Poland for ICT support to EE in social housing.
services in innovation related to ICT-based EE in social housing and beyond.
Service description - The thermal center and central domestic hot water preparation, heating and gas
installations will be controlled by an intelligent management system. This system will be connected to a
central unit. The connection to district heating network and gas network will be also integrated in the
Central unit. The sensors needed for the intelligent system performance (Light level, Presence detection,
Temperature, Humidity, Air flow) will be installed within dwellings. The possibility of installing PVs will
be considered. In such case Power electronics for integration and management of energy sources Smart
94 http://www.e3soho.eu/spip.php?article25
- 43 - | Page
meters will be installed in the dwellings with the solution implemented to monitor the energy
consumption of the dwellings. Dwellings with the ICT solution implemented will be interconnected
among them through a network that at the same time will be connected to internet. In addition, the
monitoring will be also carried out in dwellings without the ICT solution installed by means of traditional
electricity meters.
Innovative aspect
 Increased energy awareness, e.g. smart meters can provide users with direct feedback on costs and
environmental effects of their consumption. Studies show that this leads to a reduction in
electricity consumption of 5% to 15% and fosters the appreciation of electricity as a valuable
good.
consumption awareness, as well as potential for future automated energy audits.
 Opportunity for enhanced incentive schemes, with high resolution data on energy consumption
enables novel energy pricing and bonus schemes. If designed properly, these incentive systems can
unfold a positive effect on peak load and absolute consumption – and help to integrate the user in
the overall strategy.
Genova, Italy95
(Social Housing Building with 340 dwellings for renting; Estimated number of users: over 500 users).
savings and energy awareness consumption within Social Housing. The pilot will:
- allow an improvement of the follow-up and exploitation of the building (HVAC, lighting);
- exhibit interfaces that are “highly-communicating” (friendly) to the stakeholders;
- provide with a kind of show-room in Genova for ICT support to EE in social housing.
services in innovation related to ICT-based EE in new built social housing and beyond.
Service description
 The monitoring system will be integrated in a Central control unit which will control the different
energy uses of each dwelling.
 The sensors needed for the intelligent system performance (Light level, Presence detection,
Temperature, Humidity, Air flow,...) will be installed within dwellings.
 Smart meters will be installed in the dwellings with the solution implemented to monitor the
energy consumption of the dwellings.
 Dwellings with the ICT solution implemented will be interconnected among them through a
network that at the same time will be connected to internet.
Innovative aspect
 Increased quality of dwellings and energy awareness, e.g. smart meters can provide users with
direct feedback on costs and environmental effects of their consumption. Studies show that this
leads to a reduction in electricity consumption of 5% to 15% and fosters the appreciation of
electricity as a valuable good.
consumption awareness, as well as potential for future automated energy audits. The measure and
monitoring of energy consumption will allow to gather information that enables intelligent retrofit
decisions
 Opportunity for energy efficiency consulting and enhanced incentive schemes, with high
resolution data on energy consumption enables novel energy pricing and bonus schemes. If
95 http://www.e3soho.eu/spip.php?article60
- 44 - | Page
designed properly, these incentive systems can unfold a positive effect on peak load and absolute
consumption – and help to integrate the user in the overall strategy.
 Development of a global methodology for the energy efficiency of social housing replicable to
other municipalities in Italy and in Europe.
eSESH project
The eSESH project aims to design, develop and pilot new solutions to enable sustained reductions in
energy consumption across European social housing. This is to be accomplished by providing usable
ICT-based services for Energy Management (EMS) and Energy Awareness (EAS) directly to tenants. By
providing effective ICT monitoring and control of local generation of power and heat and by providing
social housing providers, regional and national government with the data they need to optimise their
energy-related policy and investment decisions at national, regional and organisational level. The project
will help Europe to meet emission targets by achieving a significant reduction of energy consumption in
European social housing.
eSESH Advanced Energy Awareness Services (EAS) provide direct, timely and comprehensible feedback
on energy consumption, enabling tenants to adapt their energy consumption behaviour. An EAS
visualises the energy (heating, electricity or water) consumptions. The tenants have access to EAS through
a web-based platform which allows them to quickly and easily obtain consumption information at
monthly, daily or even shorter time-intervals. This enables the tenants to easily evaluate whether their
consumption is to be judged as high or not. Moreover, other comparisons are possible:
 tenants can compare their consumption with other consumers or with an 'average' tenant;
 tenants can see their energy consumption by square meter;
 tenants can compare their actual consumption with their consumption in the past year or month;
 tenants can access a forecast of their consumption.
This information is provided in a way showing the developments over the years, allowing tenants to take
appropriate action in case they judge their consumption as too high. Some of the services will also
automatically and based on the observed consumption patterns and figures generate tips for tenants on
how energy consumption and costs can be saved.
These new services for social housing tenants are evaluated in 10 pilots in 6 countries across Europe.
More than 5,000 social housing tenants are to be given access to eSESH Energy Awareness and/or
Energy Management Services in the pilots.
 Angers96 and Moulins97 in France,

 Catalonia98 and Extremadura99 in Spain,
 Frankfurt100, Karlsruhe101 and Solingen102 in Germany,
 Linz103 in Austria,
 Westerlo104 in Belgium
 Brescia, Piacenza and Pesaro in Italy105
96 http://esesh.eu/index.php?id=181
- 45 - | Page
BECA project106
Starting date: January 2011
Duration: 3 years
18 partners
7 European countries
Project’s total budget: € 5 550 000
The BECA (Balanced European Conservation Approach – ICT services for resource saving in social
housing) project addresses the need to reduce energy consumption in European social housing by a very
significant amount to meet overall emission reduction targets. To substantially reduce peak and overall
demand for energy and water across EU social housing, BECA will develop a full set of innovative
services for resource use awareness and resource management. Balance is achieved by addressing not only
energy but water, by including all key energy forms - electricity, gas and heating - and by including strong
activities in Eastern Europe as well as in the North, South and West of the EU.
Social housing organisations in 7 European countries (Germany, Italy, Spain, Sweden, Bulgaria, Czech
Republic, and Serbia) and their partners are cooperating in the project to provide ICT-based energy
management and energy awareness services directly to social housing tenants and service operators.
Services will be piloted by approx. 5,000 social housing tenants across 7 sites in 7 European countries.
Sustained reductions in resource use are to be achieved through usable ICT-based services directly to
tenants, as well as by effective monitoring and control of local power generation and, for district heating,
the full heat delivery chain. Intensive work will be addressed to optimising services for tenants and
maximising impact on resource use behaviour. Technologies to be implemented in BECA pilot sites
include amongst others digital meters for all energy flows and water, in-building gateways, networks and
interfaces like in-home displays, internet portals using standard PLC and mobile networks.
Service requirements will be investigated with tenants and staff and service prototypes based on initial use
cases will be subject to user testing within the first year of the project. Results are used to finalise service
design in a second iteration of use case definition and service specification lasting some 8 months,
cumulating in implementation of operational services at all the 7 pilot sites. Pilots at sites will operate for
at least 14 months; lead sites will be identified to being operation early and provide example solutions to
others.
SHOWE-IT project107
The objective of the SHOWE-IT project is to demonstrate, under real conditions, how advanced ICT
components and systems can enable services that help reduce energy and water consumption in social
housing across Europe. To achieve this, the project takes a demand-driven approach, prioritising as
starting point an affordable investment per dwelling for Social Housing associations, and putting in place
a „menu‟ of cost-effective, integrated and easy replicable ICT-based services that significantly reduce
energy and water consumption in social housing while improving quality of life. The project expects to
achieve an overall energy and water consumption reduction of between 15% and 25% (note strong
variations between pilot sites, between seasons and between actual calendar year); more concretely the
following objectives were set:
 Diagnose in very detailed levels the actual consumption patterns of energy and water, going
beyond the consumption as a single household figure, entering into the level of typical behaviours
or behavioural patterns that result in avoidable energy or water consumption. Through qualitative
and quantitative interviews, deepen the insights of the social and psychological aspects of
106 http://beca-project.eu/fileadmin/BECA/documents/Brochure_LD-web_version.pdf
107 http://showe-it.eu/
- 46 - | Page
changing water and energy consumption patterns and the interaction that ICT enabled services
can have.
 Demonstrate with statistical relevance the socio-economic viability of the ICT-services proposed
by providing social housing landlords with smart funding models and engaging the end-users
(tenants and managers) in the different stages of the project. Install and manage affordable ICT-
based energy and water saving systems and services adapted to the energy and water consumption
profiles of the tenants in 211 dwellings distributed across the three pilots. Monitor for duration of
at least 12 months the 211 service-provisioned dwellings and a control group of 120 dwellings
across the three pilots and provide both groups with equivalent guidance on how to attain energy
and water savings.
 Assess how ICT enabled services can change the behaviour of tenants and building managers
leading to a reduction in energy and water consumption by comparing the service provisioned
dwellings / households with those in the control groups. Create business case calculation
templates, showcase documentation, technological and methodological descriptions (blueprints
and best practices) made available online and offline to facilitate replication on several levels:
inside the consortium’s social housing associations partners stock, inside a mirror group stock,
and ultimately towards any social housing entity in Europe.
The service developed by the SHOWE-IT project will be tested in 3 neighbourhoods (pilot sites) that
represent the average social housing type in their country of origin (individual homes, tower blocks, etc).
All sites have collective resources in place and are over 30 years old (corresponding to the average age of
the majority of the EU social housing stock). The three Social Housing associations engaged in SHOWE-
IT have large housing stocks where the piloted ICT-based service will be replicated. A “Mirror Group”
composed of social housing companies across Europe will closely follow the work done and the results
achieved.
ICE-WISH project108
ICE-WISH project aims to design, integrate and pilot an innovative solution for social housing, using
mature and interactive ICT, to enable sustained reductions of energy and water consumption of at least
15% below the current practice, without compromising living conditions, across 300 social dwellings in
ten European countries. This is to be addressed by providing a ‘user-friendly’ and widely accessible ICT-
based service to engage individual households as active players in developing water and energy
conservation practices as well as by providing effective and real-time ICT monitoring and control of
energy and water usage and environmental conditions and user behaviour. Furthermore, by providing
real-life information to key stakeholders, the project will encourage the implementation of environmental-
energy-related policy actions, incentives or/and investments’ decisions at public and private level. This is
to be addressed:
 providing a ‘user-friendly’ and widely accessible ICT-based service to engage individual
households as active players in developing water and energy conservation practices, managing
energy and water usage in an optimal way and optimising their living environment;
 providing effective and real-time ICT monitoring and control of energy and water usage and
environmental conditions and user behaviour;
 providing social landlords, local, regional and national public decision-makers with real-life
information in order to encourage them to implement environmental-energy-related policy
actions, incentives or/and investments decisions at public and private level.
During the 3-years project duration, the ICE-WISH consortium will carry out a daily commitment to
implement and optimize the service for social housing. For this, user and operational requirements will be
captured, investigating with households and interested parties, during the first months of the project.
108 http://www.ice-wish.eu/uk/icewish.asp
- 47 - | Page
Results will be used to establish service specifications and finalise the service architecture for monitoring a
treated group of 30 dwellings at each pilot site.
The same ICE-WISH service will be installed and evaluated in 10 pilots in 10 countries across Europe,
with latitudes ranging from 56oN to 38oN, as resource management and awareness service, within a
standard Internet-based Service Platform that will be hosted on standard low cost Set-top box (STB) that
will be connected to standard TV home sets. More than 600-900 social housing users are to be given
access ICE-WISH service in the pilots, which are designed to evaluate the impact on overall residential
energy and water consumption and behavioral changes.
Business model case studies

Energy performance contracting case studies
Municipality of Middelfart
Investment: ca. EUR 6 000 000
Overall useful area of approx. 190 000 m2
Final energy savings: ca. 24%
CO2 saving: 1 100 tons each year
In 2009, the Municipality of Middelfart, Denmark, took a look at their energy consumption and
environmental impact. They realized there was a huge potential for energy savings and CO 2 emisson and
reduction. A preliminary study of 15 public buildings found potential energy savings of 20-25% and cost
savings of around 20%. However, the municipality reached the conclusion that its administration was just
too small to handle the measures all by themselves. So they began to consider the idea of outsourcing the
work through a local ESCO109.
For a fee, an ESCO would help the municipality assess their potential for yearly energy savings, design an
energy efficient solution, install the required elements, and then maintain the system to ensure that those
energy savings are achieved. By setting up an energy performance contract (EPC), a guarantee on the
investment would be established, which would oblige the ESCO to pay the remaining amount of the
initial fee if energy savings (and cost savings) did not meet agreed projections.
In collaboration with the municipality, Schneider Electric, an energy services company, drew up a seven
year contract worth €6 million, guaranteeing annual energy savings of 21%. The main challenge for
Middelfart was securing a loan for this initial payment; unfortunately, the project’s cost of €6 million
exceeded the limit of what the Danish government could lend. Middelfart overcame this problem,
however, by successfully applying for an exemption from Welfare Minister Karen Jespersen.
In 2007, Middelfart took out the loan — due in three installments with an expected payback of 10 to 11
years — and signed the contract with Schneider Electric. Renovations went ahead: boilers were replaced;
ventilation was installed; better control technology and monitoring systems were established; and
technical staff was trained on how to optimise the operation of municipal facilities and buildings.
The Middelfart project has so far proved to be a huge success with total energy savings of more than
3,840MWh and a reduction of over 1000 tons of CO2 emissions per year. These energy savings were
attained through the renovation of 100 municipal buildings — a total floor area of 190,000 m2 — and
have achieved higher than expected results: 24% energy savings. This is 3% more than expected, the
benefits of which are shared between the municipality and the ESCO.
109 http://www.managenergy.net/focus_on_12_2012_middlefart.html
- 48 - | Page
Table 3 Total energy savings to date
Energy Savings MWh CO2 Reduction (tons)

Heating and Electricity (projected) 2,679 752.5
Conversions 526 147.8
Light Alterations 170 47.8
Water (projected) 380 106.7
Heat Savings as a Result of Lower Water
85 23.9
Consumption (projected)
Total 3,840 1078.7
In case of Middelfart, the ESCOs role was to be an advisor, implementor and operator. During the
contract period, Middelfart Municipality financed and operated the project.
Pankow district
Final energy savings: ca. 24,2%
CO2 saving: 3 000 tonnes each year
Pankow, one of the twelve districts of Berlin, situated in the eastern part of the city, decided to improve
its district’s energy consumption. Following a tender initiated by the Bezirksamt Pankow, district of
Berlin, Johnson Controls was selected to come up with solutions to reduce CO2 emissions and
energyconsumption in 55 public buildings through an “Energy Saving Partnership” (ESP), a very
successful Energy Performance Contracting (EPC) model developed by the Berlin Energy Agency110.
Regrouped under 195.000 m2 gross floor area, the various buildings are used for different purposes such
as schools, day care, administrative buildings, sport facilities and botanical garden. The biggest challenge
of the project existed in the change of ownership of all the buildings, and the corresponding impact on
the complete collection of buildings, which was successfully surpassed by the Johnson Controls team. Big
milestones of this project consisted of the reduction of energy costs and CO2 emissions, but also the
modernization of building technology systems through ESCO financing and innovations, the
optimisation of the plant operations and implementation of energy management.
In order to reduce energy costs and CO2 emissions, Johnson Controls suggested the following solutions:
 Implementation of energy management and controls systems
 Optimization of heating systems, which includes replacing the fuel system by gas, the installation
of 3 boilers, the retrofit of heating stations, the installation of thermostatic valves, the hydraulic
adjustment and the digital heat circuit control.
 Optimization of lighting by installing more energy efficient light bulbs
 Optimization and decentralization of hot potable water generation.
The Berlin Energy Agency, who acted as the energy consultant for the Pankow district, had provided
technical assistance during the preparation of the tender. Johnson Controls was chosen for its most
innovative solutions and for its know-how on ESCO services. Due to the retrofit, the district government
of Bezirksamt Pankow was able to reduce its annual energy cost by almost 25%, and additionally, a share
of 147.000 EUR from the saved costs were returned to the customer. Furthermore, CO2 emissions were
reduced by 3.000 tons. Total investment costs were 1.1 million Eur.
This Energy Saving Partnership resulted in many sustainable benefits for the 380.000 people living in the
Pankow district, such as:
110 http://www.johnsoncontrols.co.za/content/dam/WWW/jci/be/eu_library/energy_solutions/EN-Pankow-final.pdf
- 49 - | Page
 24,2% savings in energy costs and a budget contribution of 147.000 EUR annually
 CO2 emissions reduced by 3.000 tons
 No financial investment for the customer due to a solid finance model provided by Johnson Controls
 No risk for the customer due to guaranteed savings by Johnson Controls
 15 years full service and savings guarantee
 Long-term benefits: energy and resource savings and a more environment friendly public buildings
for citizens, visitors and staff.
Nyköping Community case

CO2 saving: 4 300 tonnes each year
The project started 2003 with a three-year implementation schedule. TAC Energy Solutions (Schneider
Electric) offered the Community an EPC covering 123 of its buildings totaling an area of 257,000 m2.
Improvements include the installation of a Building Management System in all buildings, new heat pumps
and solar pannels, sensor-controlled lighting and heating/cooling, etc.
The energy usage of the Community’s facilities (schools, retirement homes, offices, a heated swimming
pool, and industrial sites) was too high and the staff had no control over lowering it. The Community
wanted to improve the comfort levels of its facilities as well as to reduce their energy consumption by
10% from 2006 but had no budget for a full facilities modernization. The content of the project was
strongly oriented towards the implementation of a computerised control, operational and maintenance
system implemented together with optimisations and retrofits of the HVAC systems. But the project also
comprised a high level of targeted training and capacity building for the operational, maintenance and
managerial staff in respect to their specific roles.
The projects total turnover was about 5.5 million Euros and the contractual period is 6.5 years. During
this time parts of the installations will be written of as normal maintenance, while the rest will funded by
the ESCO and backed by saving guarantees of 0,6-0,8 million Euro per year. The savings guarantee is
currently about to increase due to additional projects being carried out by the company and since also
other cost cuts have been achieved for the municipality by integration of fire alarms and surveillance
systems etc. in the newly installed control system. The project resulted in a 21% cut in the Community’s
energy bill (saving 4,300 tonnes of CO2 each year) as well as savings on maintenance111
Energy Saving in Municipal Buildings in Small Communities in Rural Districts

(ENSAMB) case
Overall useful area of approx. 120 municipal buildings
A grouping of 5 small municipalities in rural areas of Norway are planning to achieve at least 25% energy
savings in all their 120 municipal buildings, representing 11 GWh/year and a foreseen investment of
11,25 m€. The Regional Council for South Østerdal organises a part of the energy work in the
municipalities, who have also signed the Covenant of Mayors and have a goal of saving up to 25% in
municipal buildings in the adopted Energy and Climate Plans.
111 http://www.eu-esco.org/index.php?id=14
- 50 - | Page
The project includes activities that ensure a good utilization of the local financial and human resources,
and that leads to that action will be implemented. The main reason for this is using EPC as a work tool
for most measures. Investments will be bundled into 5 packages112:
• EPC for most of the buildings belonging to Elverum Municipality
• EPC (similar) for Engerdal, Stor-Elvdal, Trysil and Åmot Municipality.
• Conventional implementation of measures for buildings belonging to the Hedmark County.
• Conventional implementation of measures in the remaining buildings belonging to the
municipalities.
• Integrated project, ie the energy saving part of buildings undergoing a major upgrade.
Project's results:
1. Be the trigger for investments of about 11,250,000 Euro by providing systematic Technical
Assistance to the municipalities. The investments are foreseen in all the municipal buildings
owned by the 5 municipalities (Elverum, Engerdal, Trysil, Stor-Elvdal and Amot), as well as in 10
buildings owned by the Hedmark County. This will lead to a significant reduction in energy
consumption and will create activity and jobs in the region.
2. To provide energy efficiency training programs to the municipal staff involved in the operation
and maintenance of the municipal buildings, as well as those who are in charge of procurement
and investment decisions for the buildings.
3. These training programs will give the staff a state-of-the-art level of competence, enabling them to
constantly optimize the energy performance of their buildings, and also to be demanding
customers via a vis the technology providers. Develop a systematic approach that will lower the
threshold for energyefficiency investments in other similar areas.
4. To describe a template organizational model and rules for an inter-municipal cooperation between
small municipalities.
5. To prepare a roadmap for the use of appropriate tools (especially EPC) for such investments in
municipalities with limited resources.
Energy supply contracting case studies
Municipality of Halsnass
Overall useful area of approx. 176,000 m2
The ESCO-cooperation between the municipality Halsnass Kommune and YIT represents the largest
energy renovation project in Denmark up until now. The new contract aims at energy renovation of 120
buildings with a total area of 176,000 m2. The basis of the contract rests on confirmed energy savings with
a write-off period of approximately 15 years113.
Halsnass Kommune is a so-called climate municipality. Kommune is obliged, for instance, to invest in
energy saving solutions and to reduce CO2 emissions by two per cent every each year until 2025, thereby
doing its part to prevent rapid climate change. In this way, ESCO is an effective means to obtain and
measure energy savings, rnaking Halsnass stand out among other municipalities in signing the largest
ESCO-agreement in Danish history. Regarding ESCO, Halsnaes Kommune is taking a pioneering role
together with YIT. The annual energy costs of Halsnaes Kommune add up to EUR 2.8 million.
According to the analysis, it will be possible to save 28.5 per cent on electricity and 30.7 per cent on
heating costs. The total investment potential of the new contract is EUR 12.3 million.
http://ensambprosjekt.files.wordpress.com/2013/01/factsheet_ensamb_jan2013.pdf
112
http://www.caverion.dk/da/dnk/om-caverion/presse/nyheder/2011/enkelt/2011/05/27/yit-garanterer-halsn%C3%A6s-kommune-
113
ambiti%C3%B8se-energibesparelser-med-esco-projekt
- 51 - | Page
The project is divided into three phases. Phase I, the phase of analysis and project design, lasted until June
2010. Phase 2, the contract and installations phase, was executed from summer 2010 to December 2011.
Phase 3, the operation and guarantee phase, has thus far been agreed to last 10 years, from December
2011 to 2021.
Comprised of both a steering group and a working group, the project team is working intensely on
making a detailed energy registration and analysis of the 120 buddings in question. The goal of the energy
analysis is not only to point out possible energy savings in e.g. heat and electricity consumption, but also
to provide recommendations on how to encourage people to think of turning to other forms of energy,
namely, renewable energy such as geothermal plus solar heat and wind energy.
Housing development Lindenhof 2114

Investment: ca. EUR N/A
Overall useful area of approx. 219 residential units
Final energy savings: N/A
CO2 saving: 80 t/A CO2 reduction
CHP unit: 20 kWel, 47 kWth
CHP-unit added in existing heating system (natural gas low temperature boiler)
60 % own consumption, 40 % electricity fed into grid
Partners: Berliner Energieagentur GmbH (took over financing) and Genossenschaftliches Wohnen
Berlin-Süd eG (GeWoSüd). Project started in 2009.
The "Lindenhof", one of the most famous housing estates in Berlin's twenties was constructed between
1918 and 1921. Today, the pioneering role model estate is a listed monument. In 2007, GeWoSüd started
modernising the "Lindenhof" with regard to energy efficiency. An existing 51 flats were renovated as
desired by their occupants and an additional 21 new attic flats with maisonette character were constructed.
Since August 2009, the Berliner Energieagentur (BEA) has been supplying the occupants of this part of
the residential estate with environmentally friendly heat and power from a combined heat and power
(CHP) unit. As an ESCO, BEA is responsible for the financing, planning, installation and operation of
the plant.
In the Suttnerstraße/Reglinstraße complex of buildings, GeWoSüd has attached a 40 mm thick thermal

insulation layer to the outside walls by arrangement with the state office for the preservation of historic
monuments. In addition to this, new windows with sealings all around and insulating glazing were
installed. Moreover, the basement ceilings were thermally insulated. This not only reduces heat losses
towards the bottom but also affects a slight rise of the floor surface temperature in the ground floor flats.
The conversion of the formerly unheated attic storeys also has a positive effect with regard to heat loss.
The result was a reduction of the annual heat requirement by about 62% in the existing buildings.
The natural-gas fired CHP unit of the Mephisto G20 type supplied by KraftWerk provides electricity,
thermal heat and hot water to the occupants. On colds days in autumn and winter, a modern, natural-gas
fired condensing boiler helps out if the demand for heat is high. The CHP unit is located visibly in a
"transparent" heating centre on the ground floor of the Eythstraße 41 building just some 150 metres away
from the consumers.
The unit has an electric output of 20 kW and a thermal output of 47 kW to generate about 103 MWh of
electricity and 225 MWh of heat per year. Power supply is guaranteed even if the CHP unit should fail for
a short time. Occupants may buy the power generated by the CHP unit directly from the Berliner
Energieagentur at a favourable tariff. Excess power is sold and fed into the local grid.
Housing development Rathausstraße115

114 http://www.berliner-e-agentur.de/en/plants/housing-development-lindenhof-2
- 52 - | Page
Investment: ca. EUR N/A
Overall useful area of 24,100 m2
CO2 saving: 186 t/a CO2 reduction
CHP unit: 97 kWth and 49kWel
Partners: Berliner Energieagentur GmbH (took over financing) and GEWOBAG Gemeinnützige
Wohnungsbau-AG Berlin. Project started in 2009.
The block of residential buildings erected in the seventies has a total floor space of 24,100 square metres.
As a supplement to an existing energy centre, Berliner Energieagentur is operating a modern calorific
value CHP unit. The owner and manager of the estate and the operator of the energy centre is
GEWOBAG which has concluded a contract with BEA for the operation of a CHP unit and the supply
of heat.
The heat generated by the CHP unit covers part of the estate's annual base load and is supported by the
existing energy centre. The power produced is excess power and fed into the public network. The total
amount of primary energy saved due to the central provision of energy using combined heat and power
compared to a conventional separate supply scheme is about 746 MWh per year.
The reduction of CO2 emissions compared to conventional power generation is approximately 186 tons
annually. The CHP unit, a G-Box 50 supplied by 2 G Bioenergietechnik, has been designed, installed and
financed by Berliner Energieagentur and will be operated at its own economic risk for a period of ten
years. The CHP unit has been provided as a supplement to the existing heat generation system and
integrated into an existing control system.
To cover the thermal base load, operation of the CHP unit is heat-guided. Hot drinking-water production
is primarily effected by means of intelligent control in a combination of CHP unit and integrated buffer
storage management. The already existing energy centre only provides support if large amounts of hot
water are drawn. In this way, a large share of the work is done by the CHP unit and its buffer storage at a
calculated operating time of 8,000 full-load hours per year.
The plant is monitored via a dedicated telephone connection in the energy centre that enables remote
control of the heating system and the CHP unit. Via the same telephone connection, the plant
automatically reports to the maintenance service if a malfunction occurs, so that they can remedy the
defect on site even before the customers notice that the heating has failed.
Chauffage case studies
Villeneuve Heating plant116

Overall useful area: N/A
CO2 saving: 35 000 tons of C02 per year
Partners: Compagnie de Chauffage and Centrale de la Villeneuve. Project started in 2006.
COMPONENTS In thousands of EUR (without VAT)

Plant acquisition 1600
Boiler technical studies 150
115 http://www.berliner-e-agentur.de/en/plants/housing-development-rathausstrasse
116 http://www.districtenergyaward.org/wp-content/uploads/2012/10/Modernization_France_Grenoble_2011.pdf
- 53 - | Page
Boiler upgrade work 1300
Unloading, storage, handling 2000
Civil Engineering 500
Design offices, miscellaneous 500
Fire safety 600
Renovation and adaptation of electrical and instrumentation 800
& control equipment
OVERALL TOTAL 7450
Assessment of the operation from an economic standpoint is positive - the investment sum spread over
an installation lifetime of 20 years amounts to 10 €uros per ton of CO2 saved. Taking an additional
operating cost of 2 €uros per ton saved into account, the financial breakeven point of the operation based
on the cost of CO2 negotiated on the carbon quotas market is situated at 15 euros per ton. It is moreover
noteworthy that the cost price of a ton of saved carbon is ten times lower for this operation than that of a
photovoltaic installation.
It took a few months and 7,5 million euros to convert the Villeneuve plant to wood energy and multiply
the consumption of recycled wood on this site by six, going from 6,000 tons to 39,000 tons at present.
At the outcome, the transformed boiler consuming 75% wood and 25% coal achieves a saving of 35,000
tons of C02 per year. Combustion of wood at very high temperature (1200°C) and the presence of elect
ro-filters furthermore considerably prevent emission of fine particles.
The work carried out on this project shows that industrial facilities initially scheduled for "all coal" can be
modernised at little cost to upgrade them to match new energy issues. Due to the success of this project,
the environmental indicators of the Heating Company are in constant progress. In the energy pool of the
6 interconnected plants, the share represented by wood has increased in five years from 6.7% to 18.4% to
a current figure of 64,000 tons on the Villeneuve and Poterne sites. It is moreover noteworthy that the
C02 content dropped from 176 g/kWh to 137g/kWh between 2008 and 2010. The objective by 2050 is a
zero carbon footprint.
To date, more than 50% of the heat produced is derived from renewable and recovery energies (R&REn)
which means that our users benefit from a reduced VAT rate (5.5%) on the whole of their heating bill.
The company plays a leading role in structuring of the local wood sector to develop and secure
procurement of fuel and ensure a competitive and stable price over time, while at the same time creating
direct and indirect employment.The good environmental performances of the Villeneuve plant highlight
the interest of promoting the use of renewable energies by heating networks in the struggle against global
warming.
In the future, the CCIAG will be doing its utmost to preserve the equilibrium between its public service
mission and the stakes involved in sustainable development. A leading energy operator able to limit the
greenhouse effect and to control consumption, it is fully committed to proposing an energy that is
increasingly clean, competitive and accessible to the largest number.
City of Varna
Overall useful area: N/A
CO2 saving: N/A
Partners: City of Varna and Dalkia Bulgaria. Project started in 2007.
Dalkia Bulgaria's parent, Dalkia International, acquired the Varna district heating company, now operating
- 54 - | Page
as Dalkia Varna, in a privatisation deal in 2007117. Dalkia Varna produces and delivers heat to around 10%
of the city's population and also generates electrical energy. Heating energy accounted for 52% of Dalkia
Varna’s total output of 106,039 megawatthours in 2011, while the share of electric energy generation
decreased by 4.0 percentage points to 48%. The company has so far replaced around 8.0 of the city's 33
kilometers of heating infrastructure. Dalkia Bulgaria's second subsidiary, Dalkia Energy Services, has
around 60 employees and generates annual turnover of 8.0 million levs.
Renovation of multifamily buildings in Varna city118
Dalkia – Bulgaria initiates projects for renovation of multifamily buildings in “Kaysieva gradina” district
in Varna city. The targeted buildings are 30, including 135 entrances. Total project size (for all buildings)
is 25 million EUR. Average project size per entrance (per association) is 0.19 million EUR. Average cost
per apartment is 5100 EUR. The co-financing equal to 50% of the costs of the implemented energy
measures would come mainly from the associations of owners. Additionally, a limited financial support
will be provided by Dalkia – Bulgaria.
Complete energy efficiency renovation of the buildings, aiming to achieve meet all renovation standards
and to achieve building energy performance for certificate class A or B. In particular this includes
insulation of walls, roofs, replacement of windows, improvement of the subscriber station of the district
heating system and replacement of the heating pipes of the DH system (from vertical to horizontal pipe
network, so that the heat consumption can be better be tracked).
Integrated Energy Contracting
Schloss Retzhof119
Investment: ca. EUR 110 000 (co-financing by building occupant: EUR 38 000)
Overall useful area: 4,000 m2
Final energy savings: 15%
CO2 saving: 35% (ca. 100 t/a)
Ex-ante evaluation: Consumption indicator amounted to ca. 185 KWh/ m2/year
Ex-post evaluation: Competitive energy prices: ca. 53 EUR/MWh, equal to 0.8 EUR/ m2 month
Partners: Landesimmobiliengesellschaft Steiermark (State Real Estate Company, Styria) and Grazer
Energieagentur Gmbh. Project started in 2009.
The Retzhof of the Landesimmobiliengesellschaft Steiermark is a complex of buildings consisting of a

castle from the 16th century as well as two seminar and guest houses from 1960 and 2009 with an overall
useful area, of approx. 4,000 m2, which are used as hotel and seminar house.
The energy related initial situation before refurbishment and the new building can be summarized as
follows: high energy costs, inefficient natural gas boiler, no insulation of the castle building (protection of
a historic monument) as well as demolition of the old boiler house to make room for the new guest
house, including the new heating centre. The consumption indicator amounted to approx. 185 kWh/
m2/year. The most important contractual relationships and cash flows are summarized in Figure 15
117 http://powermarket.seenews.com/news/dalkia-heating-infrastructure-investments-in-bulgarias-varna-top-7-2-mln-euro-208230
118 http://www.sf-energyinvest.eu/uploads/media/Fact-Sheet-Bulgaria1_06.pdf
119 http://www.bpie.eu/documents/BPIE/BPIE%20background%20paper.pdf
- 55 - | Page
120
Figure 15 Retzhof: Contractual relationships and cash flows (overview)
From the building owner’s perspective, the following goals were in the centre of interest:
1. Replacing the old boiler installation due to demolition;
2. Outsourcing of energy supply and financing of the investments;
3. Reduction of energy demand and costs through demand side saving measures as well as CO 2
reduction.
The project was implemented with the support of Grazer Energieagentur GmbH within an IEC model.
Central issues were the combination of energy efficiency measures and supply of useful energy, measure
specific quality assurance instruments substituting the EPC savings guarantee. The ESCO contract was
awarded in a combined competition of prices and solutions in the course of a two-phase negotiating
procedure. From the building owner’s perspective, some important experiences and innovative
approaches of the project can be summarized as follows:
1. The combination of energy efficiency and supply of useful energy within the IEC Model basically
works.
2. From the building owner’s perspective, a coordinating and controlling function is even necessary for
an ESCO acting as a general contractor. Especially if other building construction projects are
simultaneously been carried out as in-house implementation (here: newly building the guest house).
3. The development of comprehensive energy (efficiency) projects requires committed facilitators and
a long breath.
4. As for the castle, which is subject to protection of a historic monument, only the insulation of the
top floor is possible without problems. The solution with cellulose blown up in an open way is cheap
and functional, provided that the loft is not utilized.
5. Thanks to co-financing of the investments by using funds provided by the user of the building, the
ongoing capital costs could be reduced by approx. 30 %.
These results apply subject to a systematic monitoring and verification in the course of annual auditing of
the buildings. Furthermore, experience from ongoing operation needs to be expected.
120 http://www.grazer-ea.at/eesi/upload/download/standard%20documents/eesi_advanced_epc_integrated_energy_contracting.pdf
- 56 - | Page
Analysis of Estonian external environment for the implementation of the
different types of EPCs
Estonian energy efficiency market – market size, market segmentation, policy
instruments, EPC contracts
From 1995 to 2010 the GDP (CLV) has doubled (+4.8%/a) despite the economic recession in 2008 (–
3.7%) and 2009 (–14.3%). In 2010, a new growth started reaching 7.6% in 2011. There have been no
significant changes in the structure of the value added during the period 1995–2010. Only the share of
agriculture has the tendency towards reduction.
Energy consumption trends

In Estonia, security situation in energy supply is quite good as the total import dependency is low. In 2010
the self-sufficiency was record high: only 12.9% of the primary energy supply was imported. In the period
1995–2010 there was no steady trend in the varying use of primary energy. The power sector is the major
contributor to these changes, due to the fluctuating amount of annually exported electricity: the net
export of electricity has increased from the end of 1990-ies significantly, reaching to 4.35 TWh (33.6% of
gross generation) in 2010. The economic recession was the main reason of the decrease in energy
consumption during 1997–2000 and in 2009121.
The structure of sources in primary energy supply has been quite stable – solid fossil fuels (mainly
indigenous oil shale) constantly contributing 60–70%. Both the share and absolute amount of oil based
fuels have been falling modestly as being gradually replaced mainly by natural gas. The share of biomass is
relatively high and has increased during last couple of years to 14.1% in 2010. As to other renewable
energy sources, wind power is gaining more significance: the use of wind for electricity generation has
increased rapidly since 2003: the growth has been 46-fold by 2010 when the production of wind based
electricity was 277 GWh.
Energy intensity and efficiency of the primary energy use are the main indicators showing the potential
for energy saving. The energy intensity indicators viewed from the perspective of comparison between the
European Union and other countries were presented above, here we are going to observe the changes in
the energy intensity-related indicators which have taken place in Estonia during recent years. In Estonia,
the indicator of energy intensity has followed a clear-cut declining trend in recent years, which is a positive
sign as it reflects a decrease in energy intensity. This was significantly influenced by a rapid economic
development in recent years before the current economic crisis, when the gross domestic product
increased fast. At the same time, the energy consumption has moved much more irregularly and no clear
energy saving signs, which should have been achieved through various energy saving programmes, have
been detected. In comparison with other countries, lower prices of energy have so far been an advantage
of Estonia's economy and allowed to use energy more than others countries, but the increase in energy
prices and the harmonisation of prices are inevitable in the future. At present, energy prices in Estonia are
much lower compared to other European countries.
Estonia aims to diversity its energy balance by 2020, setting targets for the share of renewable electricity
production at 4.9% by 2020, with renewable energy accounting for approximately 25% of final energy
consumption122. Estonia’s energy consumption per capita is slightly higher than the EU average
(3.5toe/cap in 2009). Total energy consumption (primary consumption) increased slightly between 1995
and 2008 (+0.9 percent/year). In 2009, it dropped by 12 percent as a result of the severe impact of the
global economic slowdown on Estonia (-14 percent for the GDP). Between 1995 and 2009 the share of
industry in final energy consumption fell from 37 percent to 27 percent. The energy consumption of the
transport sector is increasing rapidly (+3.8 percent/year, on average, between 1995 and 2009), causing the
share of transport in final consumption to rise from 17 percent in 1995 to 24 percent in 2009.
121 http://www.odyssee-indicators.org/publications/PDF/estonia_nr.pdf
122 http://www.reegle.info/policy-and-regulatory-overviews/EE
- 57 - | Page
Households and services now account for 49 percent of final consumption, compared with 45 percent in
1995.123
Power generation Policies - The policy background to energy efficiency

The Estonian National Strategy on Sustainable Development – Sustainable Estonia, is the most general
national strategy document aimed at developing Estonia until the year 2030 and integrating economic
factors with the principles of sustainable development. The national strategy is based on the Sustainable
Development Act, adopted by the Parliament in 1995. The act established the principles for the
sustainable use of the natural environment and resources.
Several essential development documents have been adopted during last years. The National Reform
Programme ‘Estonia 2020’ (approved by the Government in 2011) established two major priorities of the
Government for moving towards environmentally sustainable economy and energy sector:
• Implementing long-term structural changes in the energy sector in harmony with Estonia’s energy
security and energy efficiency objectives;
• Reducing the general resource-intensity, including energy intensity, of the economy, through
increasing energy efficiency.
An ambitious goal has been set in the programme for making final energy consumption more efficient in
Estonia – to keep the final energy consumption in 2020 at the level of 2010, i.e. reducing final
consumption of energy by approx. 11% compared to the forecast for 2020. Keeping final consumption of
energy at the 2010 level will require decreased energy use combined with the increase in energy efficiency.
This will result in reduced emission of GHG related to production and consumption of energy. Regarding
GHG emission the National Reform Programme ‘Estonia 2020’ provides that according to the EU goals
Estonia’s emissions from the non-ETS sectors should not increase more than 11% by 2020 compared to
the 2005 level.
The National Renewable Energy Action Plan up to 2020 (NREAP) was approved by the Government in
November 2010. The national goals for Estonia in the EU 20-20-20-package require 25% share of energy
from renewable sources in gross final energy consumption by 2020 and allow 11% increase of the
greenhouse gas emissions outside the emission trading directive scope by 2020, if compared to the 2005
level. The 10% share of renewable energy sources in the road transport fuels by 2020 is an EUwide
common goal. The NREAP presents estimations, planned policies and measures for achieving the
national targets. Implementation plan for years 2010-2013 of “National Renewable Energy Action Plan
up to 2020” is also adopted.
It has to be noted that the plan predicted the share of renewable energy in final consumption to be 20.9%
in 2010, but, actually, the indicator reached to 24.0%.The improvement of energy efficiency can be
considered as a goal of increasing priority for the Government. The National Energy Efficiency Plan
(NEEP) was approved in 2007. The plan set strategic aims and objectives for increasing energy efficiency,
as well as measures for achieving these objectives. It also took into account the task of achieving the
indicative energy conservation objective set by the Directive 2006/32/EC, i.e. saving of 9% of final
average energy consumption during the period of 2008–2016. In the plan it was estimated that for
investments aimed at increasing efficiency in the fields of consumption, production and transfer of fuels
and energy a total of 96.0 MEUR is needed during the period up to 2013.
In September 2011, the Ministry of Economic Affairs and Communications (MoEAC) presented the mid-
term overview of implementation of Energy Efficiency Plan 2007–2013. Also, a further implementation
plan was adopted and presented to the EC as the Second Energy Efficiency Action Plan of Estonia
(NEEAP2). The action plan focuses on the following aspects of energy efficiency:
• continued support programmes for energy conservation activities in multi-storey residential
houses;
123 http://www05.abb.com/global/scot/scot316.nsf/veritydisplay/0fb7b8f1625a2b8ac12578b100236669/$file/estonia.pdf
- 58 - | Page
• a new measure for energy conservation in small (family) houses;
• implementation of the programme for renovation of public sector buildings;
• improving energy efficiency for increasing the competitiveness of industry and small enterprises;
• energy conservation in the transport sector;
• energy efficiency in the service sector;
• improving the quality of implementation of the energy conservation policy.
The NEEAP2 includes 99 measures for increasing energy efficiency in all sectors. In NEEAP2 (as well as
in NREAP) there is presented a long-term forecast of the final energy consumption in Estonia by the year
2020. The forecast was compiled by the MoEAC when drawing up the NREAP until 2020. According to
this forecast, Estonia’s final energy consumption would be 137 PJ (3 272 kt oe) in the case of the basic
(reference) scenario and 131 PJ (3 127 kt oe) in the case of the additional energy efficiency scenario in
2020.
Regarding energy policy, no institutional changes have been made during a long period. The MoEAC is
the governmental institution directly responsible for energy related issues, including energy efficiency and
conservation, also for the use of renewable sources in the energy sector. In the MoEAC the Energy
Department is responsible for regulations necessary for the functioning of national fuel and energy sector.
The department includes two divisions:
• Energy Market Division;
• Sustainable Energy Division.
The main task of the department is to elaborate national development plans focused on the efficiency,
competitiveness and environmental sustainability of fuel and energy management and to ensure their
implementation, to arrange the formation and administration of the minimum stocks of liquid fuel and to
prepare draft legal acts for regulating the field. In Estonia, there is no energy agency or any institution
with similar tasks. Some aspects of efficient energy use in residential housing sector are dealt by
foundation KredEx that was established in 2001 by the MoEAC with the main aim to improve the
financing of enterprises in Estonia, and to decrease export-related credit risks. Nevertheless, KredEx
includes also a Housing and Energy Efficiency Division, which helps to alleviate housing-related financial
problems and promotes energy efficiency in the existing housing stock in Estonia. KredEx provides
information on implementation of energy efficiency measures in apartment buildings manages
information pertaining to energy conservation in apartment buildings and arranges meetings between
various parties involved in the further development of energy use in buildings in Estonia.
To support the development of renewables (wind and cogeneration), the Electricity Market Act of 2007
offers eligible producers (under 400 GWh/year) two options: they can either sell electricity at a fixed tariff
within the framework of the purchase obligation, or they can receive a subsidy and sell electricity at
market prices. The transmission system operator, Elering OÜ, reviews its purchase obligation costs every
year, and splits them between the distribution companies proportionally to their sales volumes. Green
certificates were created in 2001 by Eesti Energia, the largest power producer in Estonia.
- 59 - | Page
Figure 16 Total and final energy consumption trends (left) and distribution of final energy consumption by sector (right)
Energy efficiency measures
Residential Sector - Regarding the efficient use of energy in residential sector, the National
Development Plan for Housing Sector 2008–2013 has a key importance. Among main objectives of the
plan, there is one targeted to improvement of quality and sustainability of the housing stock in Estonia.
There are several measures presented in the plan. The energy saving effect of the plan has not been ex-
ante estimated.
Transport Sector - Regarding the public transport, in Estonia one of the main problems is the poor
condition of rolling stock. The average age of buses in public transport is more than 15 years. Currently,
public transport subsidies are used to compensate up to 60% of the costs connected with the providing
public transport services on local bus lines. Compensation payments are paid in accordance with
regulation no. 1370/2007 of the European Parliament and of the Council. However, the compensation
mechanism has not stimulated public transport service providers to make sufficient investments into
therolling stock. Therefore a measure through the Green Investment Scheme (GIS – financed from the
sales of unused AAUs) was introduced, which is based on the principle that new buses are rented to a
public transport service provider. In 2010–2011 21 MEUR were invested in energy efficient and
environment friendly buses (105 buses) for public transport system. In May 2011, the next larger
investment in frames of the GIS in public transport was made. The sum of 45 MEUR (from AAU sales
revenue) was invested in energy efficient and environment benign trams for City of Tallinn..
Industrial Sector - The latest national level document setting policy targets for energy performance in
industry is the second Energy Efficiency Action Plan (NEEAP2) presented to the European Commission
in September 2011. In the Plan it is declared that energy consumption in industry has become more
efficient due to measures that are related to the wider energy policy, such as opening of the electricity
market, renewable energy charge, fuel and electricity excise duties and reduced differences in excise duty
rates. Therefore, in the NEEAP2 it is concluded that energy efficiency measures for industry must focus
primarily on improvement of the skills and awareness of specialists. It is stated that these energy
conservation measures must be implemented simultaneously with other activities to improve
competitiveness of companies, and energy conservation policy must be based on following principles:
• encouragement to perform energy audits in industrial plants and small enterprises;
• contribution to improvement of energy auditors’ qualification with respect to industrial energy
conservation issues, fostering energy consultants’ participation
• in EU projects related to energy conservation in industries;
- 60 - | Page
• better financing opportunities for energy conservation measures in industries and small
enterprises;
• development of databases and methods for benchmarking companies’ energy performance.
The NEEAP2 includes 12 specific measures for implementing these principles in industry. As to
measures supporting better energy performance in industry for a longer period in an indirect way is the
exemption related to the income tax. Regarding energy efficiency and impact on environment, there is a
quite essential impact as investments in new technology improve energy efficiency as well, as a rule.
Tertiary Sector - Regarding public sector, the Government has gradually concentrated the development
and management of state assets into one company Riigi Kinnisvara AS (RKAS; State Real Estate Ltd)
established in 2001 with the objective to guarantee the saving and effective provision of the real estate
service to the executors of state authority. RKAS creates the preconditions for the state for operating at
the real estate market as one person and with the single objective – to guarantee the prudent and effective
management of state assets. RKAS has been issued the ISO quality management (9001) in 2007, and
environmental certificate (14001) in 2009. In frames of the GIS financed from the sales of surplus AAUs
the renovation of public buildings is supported to increase the energy efficiency. The renovation process
is arranged by the RKAS under the supervision of the Finance Ministry. The applications were received
from 201 municipalities (out of total 226) for renovation of 862 buildings:
• 63% – schools, kindergartens;

• 26% – cultural institutions;
• 7% – social and health care establishments;
• 4% – other buildings.
The actual number of state and municipality owned buildings being currently renovated is 493 with the
total floor area of more than 1.1 M m2. The total renovation budget is approximately 172 MEUR and the
resulting CO2 reduction is estimated to be ca 680 Gg during the 30 years period. Regarding the possible
exemplary role of the public sector in the use of energy in buildings, the NEEAP2 sets a target to
construct at least 10 publicly accessible nearly zeroenergy buildings of various types with total usable area
not less than 5 000 m2 in Estonia by 2015.
Sustainability requirements in public procurement procedures

According to the Directive 2006/32/EC, member states must implement at least two measures to ensure
energy efficiency and conservation via public procurements. Estonia has decided to implement the
following two measures:
• requirements to purchase equipment and vehicles based on lists of energyefficient product
specifications of different categories of equipment and vehicles;
• requirements to use energy audits and implement the resulting cost-effective recommendations.
The first measure is implemented on the basis of the Public Procurement Act that provides general
principles for conducting public procurements. The second measure has been implemented by the State
Assets Act, according to which certain principles have been applied to ensure efficient management of the
real estate owned by the state. The management of the state’s activities with respect to buildings will be
centralised and one provider of real estate services to the state appointed. Riigi Kinnisvara AS (State Real
Estate Ltd.) has been founded for that purpose. The process is gradual, and currently the usable area of
the buildings in the portfolio of RKAS amounts to more than 517 thousand m2. The aim of the provider
of real estate services is to ensure expert and cost-effective management of the real estate portfolio. Also,
the State Assets Act provides setting up a state real estate registry that gathers data with an aim of
providing a uniform overview of all buildings the state uses. Reconstruction of the existing public
buildings and construction of new ones by local authorities depends considerably on the state’s support
for investments. Investments are applied for in a competitive way and applications are evaluated usually
taking into account the environmental impact and energy performance of the projects as well. At present,
the vast majority of the projects aim at improving the energy performance of buildings and facilities
- 61 - | Page
In Estonia, there is no institutional body for registration and evaluation of measures taken to improve
energy efficiency in general or in any specific sector. Therefore, there is no regular data collection on
energy savings from relevant measures. Due to such situation there are no quantitative ex-post evaluations
available for measures entered into MURE database for Estonia. All estimates on measures taken in
Estonia represented currently in the MURE on-line database are based on very rough ex-ante opinions
made by experts.
At present, the widest practice of quantitative evaluation of energy efficiency measures can be found in
frames of the Green Investment Scheme (GIS). The GIS is the system of investment rules and
procedures based on the revenues from selling of surplus AAUs stipulated in the Ambient Air Act. The
GIS is focused on investments resulting in reduction of GHG (CO2) emission. Nevertheless, almost all,
with some exceptions (like wind generators and efficient CHP plants), environment targeted investments
result in reduction of final energy consumption due to applying up-to-date energy efficient technology. In
Estonia, the GIS are focused on the following activities:
• renovation of buildings in public sector as well as in residential buildings;
• introduction of efficient and environment benign transport (buses, trams, electric cars);
• replacing street lighting systems with the efficient ones;
• renovation and switching from fossil fuels to biomass of boiler and CHP plants;
• renovation of DH pipelines;
• construction of wind energy generation parks.
Regarding the residential sector, for investments in apartment buildings the detailed application
procedures were elaborated as well. To get the grant money the energy savings from 20% to 50% have to
be reached. The potential of energy savings together with plan for proposed renovation works have to be
compiled by the certified energy auditor. Currently, the renovation works are in progress. The average
renovation cost is 60 EUR/m2 and estimated energy saving is 40%. The similar grant was available for
renovation (thermal insulation) of small residential buildings: family houses, detached and semi-detached
houses). According to the energy audits, the average renovation cost in this type of buildings is 160
EUR/m2 and estimated energy saving will be 68 kWh/m2 a year. As to other fields of investments in
frames of the GIS, the fully refurbished street lighting in seven towns (approximately 11 thousand lamps)
should result in energy savings of 66%. This is an ex-ante estimation as well.The great work on estimating
the quantitative effect of energy efficiency measures has been made in the preparation process of projects
for the GIS. The considerable experience gained can be a basis for enhancing the evaluation of energy
efficiency projects in future. Certainly, it should be combined with the follow-up data collection that
enables the ex-post evaluation of measures.
Energy service market in Estonia
Information about the Estonian ESCO market is scarce and as of 2009 the market has not yet taken off.
No ESCO activity was registered in 2009 and there is no common understanding of the nature of Energy
Efficiency Services and contracts (Labanca 2010). Until 2006, only two companies offered ESCO-type
contracts supplementary to their core business, and the market was limited to a few transactions with the
public sector involving public lighting, control and automation systems (EC DG JRC 2007). The high
level of governmental support and the low interest rate loans available for households limit the market for
ESCOs by removing the incentive to look for ESCO services that have a financing element.
Municipalities use structural funds for energy system improvements while the industrial sector has
internally the technical and financial capacity to implement energy efficiency measures (EC DG JRC
2007).
Support is given to the local authorities for the refurbishment of the DH systems and public buildings
(Tepp 2010). Identified barriers for the establishment of ESCOs and long term contractual agreements
include election cycle-based thinking and attitudes and changing regulatory framework (EC DG JRC
2007).
- 62 - | Page
According to survey conducted on 21st of February 2013 by Ministry of Economic Affairs and
Communications, there are currently 2 companies, who have organized projects similar to ESCOs – AU
Energiateenus Ltd and Energiasäästubüroo OÜ124.
Identifying suitable business models for the Estonian market
During this market research, 5 main ESCO business models were described. According to the aim to
identify the appropriate ESCO model for Estonian municipalities/companies, the selection of cases and
countries were based on different aspects:
• Climate - Nordic countries were included because of the climatical similarities.
• The spread of district heating - DH is mainly found in northern, central and eastern European
countries. In cities like Copenhagen, Helsinki, Warsaw, Vilnius, Riga as much as 90% of
residential heat demands are satisfied by DH.
• Size of the market – Germany is on of the biggest markets in the Europe
There can be several assumptions made based on the market intelligence:
• Energy Supply Contracting is not preferred. Energy Supply Contracting is not a well-known
concept in Nordic countries - an important reason for this is the well built-out DH system. In the
case of heating, ESC includes planning and instalment of heat boilers, energy distribution,
operation and maintenance of the production facilities, procurement of fuel etc. ESC is generally
oriented towards decentralized (local) power supply rather than larger centralized solutions.
According to Estonian Competition Authority, the prevalence of DH in Estonia is 70%125.
• Energy Performance Contracting is well suited for large scale projects, especially in the public
sector. EPC has been used successfully in different countries for the past ten years and seen a
significant growth in the past five years. In case of the EPC contract, ESCO has to make the
decision, whether to make a guaranteed savings or a shared savings contract:
o In case of the guaranteed savings model, the customer will finance the project (either
through own funds or through loans) and the ESCO will in return guarantee a minimum
energy savings level (percentage). This can be more suitable for a starting ESCO, who has
not enough capital/assets to finance the investment or get a bank loan with favourable
terms and conditions. For example in Sweden, the vast majority of EPC contracts are
done in the public sector and customers in this sector generally can get more beneficial
financing on their own than any ESCO can provide.
o With shared savings, the ESCO finances the project and the savings are then split between
the customer and ESCO according to a predetermined split. In this case, ESCO has more
negotiation power and can define better terms for himself. However, as the EPC is a
complex contract form that is not suited for smaller projects because of the high
transaction costs and Estonian customers do not have a high awareness about the EPC
today; it might be hard to “sell” the service.
• Integrated Energy Contracting is a business model that can be said to expand the ESC model
to include demand side measures. For example in Sweden, because of the lack of ESC projects,
IEC will probably not be as suited for the Swedish market compared to other markets such as
Germany. As ESC is not a well-known concept in Nordic countries and not used in countries
with a strong DH prevalence, IEC might also be not suitable for Estonian market as well.
• Chauffage or comfort contracting is a contract form that revolves around providing a function.
In case of the Chauffage model, the ESCO will be responsible for everything needed to provide
the function, this can include setting up heat boilers/coolers, procurement of fuel, operation,
service and maintenance of production facilities as well as customer side technical installations. To
lower the cost of operation and maximize their earnings the ESCO must optimize and implement
energy efficiency measures. The Chauffage model suits companies who already deliver DH and
electricity as their main business area. Those companies can use their own DH for the energy
supply. The Chauffage business model benefits from the large commercial properties building
space.
124 http://www.riigikogu.ee/?op=emsplain&page=pub_file&file_id=89415847-c3dc-47da-9310-0de6438d3127&
125 http://www.mkm.ee/public/Soojusmajanduse_analuus_MKM_2013.pdf
- 63 - | Page
As mentioned earlier, there are currently 2 companies, who have organized projects similar to ESCOs in
Estonia. Because of this, there might be following barriers on the market:
• Society is not ready to accept ESCO services because
o There is general lack of awareness in Estonia of the ESCO concept. For example, when
first ESCOs were started in Latvia, the companies (mostly lightning companies) found it
difficult to convince clients because of what was perceived to be clients’ general lack of
awareness concerning ESCOs. This is one issue, which also the Estonian ESCOs must
overcome.
o There has been little experience with the operation of an ESCO in Estonia.
• There are no existing models for performance contracting.
• The Estonian ESCOs have to face the financial risk of the initial investment.
Based on the information gathered, the most suitable business model for Estonian market would
be Energy Performance Contracting. EPC is well suited for countries with a high DH prevalence.
ESCO can variate, wheather to choose the guaranteed savings or shared savings model.
According to the District Heating Act Section 9, Article 4, the heat price set by the heating company can
not exceed the Competition Authority approved limit. The lowest DH price in Estonia is in Narva, where
the MWh price is 32.98 euros. The highest price is in Rummu network area, where the MWh price is as
high as 108.89 euros. (Annex 4) The average price for DH in Estonia is 87.24 €/MWh and the upper
quartile is 95.27 €/MWh. Therefore it can be discussed that the ESCO potential would be the
biggest in the areas, where the €/MWh is above average or in the upper quartile.
- 64 - | Page
Annex 1. Developments in national ESCO markets in Europe: 2007-2010
Country Change Nr. ESCOs Categories of energy service providers Projects
Albania N/A None N/A N/A
Austria Steady growth 5-14 Mainly Energy service & supply companies and consulting Supply side projects, complex building projects involving
and engineering firms more energy services, and street or indoor lighting
Belarus N/A None N/A N/A
Belgium Stable growth 7 large and Larger international Manufacturers of Building Public buildings, HVAC and control and cogeneration
5-7 small Automation and Control Systems
Bosnia N/A None N/A N/A
Herzegovina
Bulgaria Slow growth 20 Manufacturers of Building Automation and Control Public buildings involving lighting and HVAC and complex
Systems refurbishment projects
Croatia No significant 2 Energy service and supply and facility management and Complex public building projects and street lighting
changes operation companies
Cyprus N/A N/A N/A N/A
Czech Republic Stable growth 8-10 Manufacturers of Building Automation & Control Systems Public buildings involving HVAC-control system
and energy services and supply companies installation, boiler houses, lighting and pipes insulation
Denmark Strong growth 10 International small sized Manufacturers of Building Mainly modernization and refurbishment of public
Automation & Control Systems and facility & operation buildings and industrial projects
companies
Estonia N/A 2 N/A Public sector involving public lighting, control and
automation systems
Finland No significant 8 Both national and international companies Industry sector projects involving process or horizontal
changes Manufacturers of Building Automation & Control technologies and motor systems with a smaller
Systems, facility management and Operation & Control percentage in public buildings
companies and consulting/engineering
France Growth 10 big and Facility Management and Operation Companies, DH, CHP, Public buildings and private non residential
approx. Manufacturers of Building Automation & Control Systems buildings
100 smaller
actors
FYROM N/A 1 N/A N/A
Germany Stable growth 250 – 500 Energy suppliers and Manufacturers of Building Public and private non residential building projects and
Automation & Control Systems Cogeneration, DH and renewables through CEM
Greece Market 2 Energy Services and facility management companies Industrial and tertiary sector involving thermal solar
- 65 - | Page
initiation heating
Hungary Fluctuation 20-30 Local SMEs, daughter companies of energy suppliers, Mainly in public sector, some in residential and
multinational ESCOs CHP/renewables, lighting, heating, boilers, energy system
operation, CHP, and block house renovation
Ireland No significant 15 Consulting and engineering firms, energy service & BOOT CHP and supply side projects
changes supply companies and facility management companies
Italy Growth 50 - 150 Subsidiaries of International Groups with core business in Renewable, Cogeneration, Industry and lighting
Energy Service Provision, mainly small-medium sized
Latvia Strong growth 5 Engineering consulting firms and energy services and Co-generation & other supply side projects in the
supply companies industrial sector involving more energy services
Lithuania Slow growth 6 National and international Manufacturers of Building DH, co-generation and public buildings sector
Automation & Control Systems
Luxemburg N/A 3-4 N/A N/A
Malta N/A None N/A N/A
Moldova N/A None N/A N/A
Montenegro N/A None N/A N/A
Netherlands Stable growth 50 Construction and engineering companies Energy systems in medium-sized and large non-residential
new building projects
Norway Shrinking 10 Manufacturers of Building Automation & Control Mainly public buildings, lower share in private non-
market Systems, facility management and engineering residential buildings
consultancies
Poland No significant 3-10 Energy services and supply companies Street and indoor lighting and co-generation in the public
changes sector
Portugal Slow growth 10-12 Small companies started as Public Private Partnerships Buildings, outdoor lighting, industry involving
and subsidiaries of larger national or multinational cogeneration, micro-cogeneration, audits, lighting, energy
companies recovery, motors and drives
Romania Strong growth 14 Consulting and engineering companies, facility Mainly in industry (industrial processes and co-generation)
management and operation companies, energy service & and less in public sector projects ( DH and street-lighting
supply companies, equipment suppliers and dealers measures)
Russia Shrinking N/A Energy suppliers and energy equipment manufactures Co-generation projects with the installation of auxiliary
market energy equipment such as boilers in the industrial and
municipal sectors
Serbia Growth 10 Small engineering companies and building and control Industry and public building projects
manufactures
- 66 - | Page
Slovakia No significant 2-5 Energy consultant companies, building and control Complex building projects and co generation
changes manufactures, and energy service companies
Slovenia More actors 2-5 Energy services DH and street lighting
but no
significant
change in the
market size
Spain Growth > 15 National and international large utilities, construction Public Buildings, private non-residential buildings, and
and multi-services companies industries involving cogeneration, audits, HVAC control
systems, lighting
Sweden Strong growth 5-10 International medium sized building & control Mainly modernization and refurbishment of public
manufactures and facility & operation companies with buildings involving lighting, HVAC, complex
EPC as a side business refurbishments and fuel switch
Switzerland Slow growth 76 energy Local energy producers and distributors DH and heat pumps in buildings
contractors
Turkey Steady growth 5 Engineering consultancy firms and manufactures Industry and private non-residential buildings
Ukraine Steady growth 30 Energy auditors and equipment manufacturers Industry
United Kingdom No significant 20 Subsidiaries of large international Manufacturers of Industrial and large commercial applications, complex
change Building Automation & Control Systems and energy building projects and co-generation, DH and supply side
service & supply companies projects in the public sector
- 67 - | Page
Annex 2. Market segments in which the business models work
- 68 - | Page
Annex 3. ESCO markets in Hungary, Slovakia, Czech Republic, Croatia, Poland and Romania
Market Preparedness: Awareness and Application of EPC, ESCO/EPC Demonstration Project Availability, and Other Implemented ESCO Projects
HU The ESCO industry in Hungary dates back to the early 1990s with EPC training funded by USAID. After 15 years, the market is experiencing stagnation.
SK "2003 could be considered as the real starting point for ESCOs. The Energy Center in Bratislava has divided companies providing EPC to their orientation and
potential to offer ESCO services."
HR So far three projects have been completed in the country with above 40 projects more in the preparation or implementation phase. The “first out” contract
model has been used in past projects.
CS The Czech Republic is the ESCO frontrunner among Eastern European countries, even though the market is still considered to be in its initial period. The EPC
concept has been known since 1992. EPC is recognized as one of the support mechanisms for energy saving. The most common contracting form is guaranteed
savings. The first EPC project was the renovation of the thermal energy handling system at Balovca Hospital. About 70 projects have been completed through
EPC but over 30% of these have been performed by one ESCO.
PL "It was at the beginning of the 1990s that the first company, ECOGY, conducted the modernization of a coal boiler house which was designed to be re-paid by
the savings achieved by the client. In the late 1990s, the ESCO model became a rather commonly used method for the modernization of heating systems at
military units. Presently, not many ESCOs conduct EPC based projects. The number of companies that have active EPC agreements is estimated to be between
8 and 13 only, primarily led by Siemens."
RO Training in EPC was funded by USAID as early as 1992. Energy Efficiency Fund 63 was established by the World Bank and financed by GEF and the
Romanian government to increase energy conservation activities and implement measures
Substantial Number of Active ESCOs
HU "Based on a registry of the Energy Center, there are about 30 ESCOs or ESCO-type companies but five or six companies cover 80% of the market."
SK By 2006, there were about 30 ESCOs and ESCO-type companies.
HR There is currently only one established ESCO (state-owned) offering EPC, which was established in 2003. There are new companies that are attempting to enter
the market and there are many EE provider companies that do not offer guarantees.
CS "There are currently about 17 ESCOs in operation: five companies focus on providing services according to the EPC concept, two companies work as energy
service providers and approximately a dozen companies provide long-term energy delivery contracts."
PL Large global and European companies (Dalkia, MVV, Landys & Gyr or Siemens, Ineoineo, and Auxima Services) began to open their branches in Poland in the
late 1990s. Three other companies were founded by the Polish Electro Energy Network.
RO "Currently there are two companies—one specializing in electricity and the other in thermal services which qualify as private ESCOs and offer pure EPC
solutions. In addition, there is one ESCO-type company chiefly working with CHP projects. There are a few regional ESCOs active in Romania offering energy
supply contracting."
Sector/Technology Focus
HU Projects were primarily focused on public lighting, cogeneration, DH system improvements, heating and hot water system interventions, industrial water and
steam supply, air conditioning, automation and biomass. Recent figures suggest the distribution of ESCO projects is 30% in industry, 30% in DH retrofits and
development, and 30% in the municipal sector.
- 69 - | Page
SK ESCO clientele includes municipal buildings, schools, banks and hospitals. Outsourcing in the industry and private facilities is becoming more and more
popular. ESCOs normally participate in building renovation and public lighting projects.
HR EE projects have been focused on public lighting, system improvements in educational buildings, cogeneration, HVAC, steam system recovery and insulation.
CS "The public healthcare sector is the primary focus for ESCOs, while educational buildings, military and other state-owned sectors are appealing projects, too.
Apart from the public sector, the private sector (typically industry) is also on track regarding energy efficiency investments."
PL ESCO projects actually include all of the market sectors. French Dalkia and German MVV are active in municipal projects. The most often implemented EPC
undertakings in the ESCO model are the thermal modernization of buildings, replacement of heating sources and the modernization of street lightning.
RO There are not any technical barriers to carrying out EPC projects in Romania as all the new technologies are available.
Government Support Exists (energy law, policies, programs, etc.)
HU
SK Government commitments have been emphasized in the 2005 National Energy Policy. This policy identified many tools promoting energy efficiency, such as
minimum requirements for the energy efficiency of new and large existing buildings.
HR The legislative framework is not particularly supportive of the ESCO concept. Secondary legislation on EE has not been developed and the ESCO model is not
recognized by the authorities as an individual business model.
CS A new law was passed in 2001 that made energy audits obligatory for large consumers.
PL N/A
RO "The Romanian Energy Efficiency Law was passed in 2000, which puts forward a number of measures to support energy efficiency. Audits are obligatory above
a certain size. However, penalties are so small that plants prefer to pay them than comply with this regulation."
Potential ESCO Market
HU The ESCO market size is approximately EUR 150-200 million worth of investments
SK N/A
HR The estimated potential for energy savings in Croatia exceeds EUR 400 million.
CS EE savings are estimated at about EUR 100 million or EUR 10-20 million/year.
PL N/A
RO N/A
Public-Private Partnerships and EE Project Financing/Funding
HU Municipal authorities often feel uncomfortable about sharing the financial benefit of their project with a private company. Financing of ESCO projects by banks
is not a problem. TPF is a well-accepted and widespread scheme. Banks are particularly open to participation in EPC.
SK "Foreign-based companies whose main profile is energy systems operation, such as DH operators, are public-private partnerships in the form of joint ventures
of private companies with municipalities."
HR "Besides international aid and loans, local financial institutions have proved to be interested and the ESCO’s own equity is being used for project
implementation. There is the Fund for Environmental Protection and Energy Efficiency (in the form of subsidies)."
CS "Financial institutions, including mostly local banks, are available and are ready to participate in TPF. The IFC is running its “Commercialization Energy
- 70 - | Page
Efficiency Facility,” providing loan guarantees for ESCOs and end-users."
PL The main financing sources have been commercial banks, private sources, LFIs and, until the end of 2008, the World Bank.
RO N/A
Technical Framework Preparedness (IGA, M&V, tools, etc.)
HU Industrial/commercial sites and buildings sometimes lack baseline data as they do not have detailed billing systems and pay average fees per month, not
according to the real consumption. ESCOs cannot prove the savings achieved using such information or they have to spend one to two years before an EE
project begins. Accepted M&V practices have not been widely introduced.
SK There is lack of data to construct baselines. Energy prices are subsidized.
HR
CS It would appear that more attention needs to be given to appropriate project implementation and especially M&V.
PL N/A
RO N/A
Other Barriers to Consider
HU Presently, EE project payback periods are longer (5 to 7 years), which is actually one of the major challenges ESCOs are facing. International aid, which was
previously very substantial, is decreasing or coming to an end. Most local authorities are still not informed about the opportunities ESCOs offer and are often
suspicious of the financial schemes.
SK "The banking sector still has limited understanding of, and experience with, EE project financing. Banks therefore perceive such projects as risky, resulting in
lending terms that may not be acceptable for ESCO project developers. This limits ESCO activity to the large ESCOs that can financially support their own
activity and could limit the growth of the sector in the medium term.
HR "Consumers show a lack of interest in EE due to little knowledge about ESCO benefits and lack of understanding of the concepts. Public procurement is
complicated."
CS Scepticism by management towards EE investments and EPC still lingers. Prejudices against complex solutions remain strong. ESCOs are not yet ready to take
projects with a long payback period (more than 6 years). There is still room to develop and some sectors with a high savings potential have hardly been tapped
(such as the military).
PL "The Industry sector has had real difficulty accepting the ESCO model due to negligible amounts of savings compared to total operating costs. EPC models lack
references concerning the financial settlement for this kind of business activity leading to apprehension among the potential customers to adopt TPF. An
important area that restricts the efficient market has been the lack of functional financial instruments that are specialized in ESCO companies. Even those
easiest and most popular; i.e., guarantees, were practically out of reach."
RO Financial barriers remain. Banks still lack the internal expertise to evaluate energy efficiency projects. They are not yet ready to finance projects based on the
credibility of the investment and the prospects of savings, but still use the traditional asset-based financing and evaluate client creditworthiness.
- 71 - | Page
Annex 4. The heat threshold prices for consumers approved by the Competition Authority (July 2013)
(http://www.konkurentsiamet.ee/?id=18308)
Narva linn 32,98 Koeru alevi vp 68,89 WTC Tallinn Kinnisvara AS 84,52
Sillamäe vp 47,95 Rõuge aleviku vp 69,31 Põlva vp 84,78
Kuressaare vp 53,39 Kiviõli vp 69,73 Kohila vp 84,95
Lavassaare vp 53,62 Avinurme vp 69,94 Tapa linna lõunapoolne vp 85,64
Paide vp 56,94 Järve Keskuse vp 70,14 Suure-Jaani vp 86,45
Puiga vp 57,23 Haapsalu vp 71,57 Aruküla vp 86,64
Tootsi vp 58,19 Sauga vp 71,64 Laekvere vp 87,22
Tõstamaa vp 58,57 Viljandi ja Jämejala vp 72,02 Ala vp 87,26
Keeni vp 60,01 Linnamäe vp 73,63 Näpi vp 87,46
Türi vp 60,18 Nõmme Linnaosa vp 74,52 Padriku vp 87,76
Linte vp 61,86 Põltsamaa vp 75,42 Mõisaküla vp 88,36
Ruusa vp 61,86 Ülenurme ja Tõrvandi vp 75,88 Olustvere vp 89,14
Valga vp 61,94 Ahja aleviku vp 77,93 Mäetaguse vp 89,17
Paldiski vp 61,98 Peri vp 78,00 Rapla Võsa tn vp 89,42
Keila vp 62,78 Mooste vp 78,77 Käärdi vp 89,72
Pärnu vp 63,95 Tallinna vp 79,37 Iisaku aleviku vp 90,01
Tartu vp 64,02 Adavere vp 80,11 Laagri vp 90,14
Imavere vp 64,40 Keila-Joa vp 81,88 Tõravere vp 90,37
Jüri vp 64,74 Kesklinna-Pirita vp 82,44 Kostivere vp 90,40
Parksepa aleviku vp 64,79 Rakvere vp 82,63 Viimsi vp 90,42
Karksi-Nuia vp 65,32 Aseri aleviku vp 83,09 Raasiku vp 90,43
Võru vp 66,32 Loksa vp 83,24 Vändra vp 90,54
Tartu vp 66,36 Väike-Maarja vp 83,78 Viiratsi vp 90,92
Kiikla vp 66,42 Jõgeva vp 83,94 Abja-Paluoja vp 90,94
Kärdla vp 66,54 Haabneeme vp 83,98 Õisu vp 90,95
Tõrva vp 66,58 Saku vp 84,16 Kehtna vp 91,31
Koigi vp 66,60 Põhja-Tallinna linnaosa vp 84,17 Tiskre-Hansu vp 91,43
Ahtme-Jõhvi ja Kohtla-Järve üvp 66,62 Tabivere aleviku vp 84,23 AS Rapla Küte 91,52
- 72 - | Page
Saue vp 91,60 Nooda vp 97,87 Ilmatsalu vp 101,05
Riisipere aleviku vp 92,41 Merirahu elamuala vp 98,09 Abja-Paluoja Järve katlamaja vp 101,22
Kärla vp 93,00 Uulu vp 98,26 Oisu vp 101,77
Väimela aleviku vp 93,31 Sürgavere vp 98,42 Keila-Joa vp 102,58
Tapa linna Leina katlamaja vp 93,31 Loo vp 98,57 Turba vp 103,18
Päri vp 93,36 Püssi vp 99,52 Vana-Võidu vp 103,88
Narva-Jõesuu vp 94,27 Roosna-Alliku vp 99,59 Märjamaa vp 104,03
Viitina vp 94,33 Rõngu vp 100,02 Päinurme vp 104,35
Järva-Jaani vp 94,76 Tarbja vp 100,02 Märja vp 106,39
Paikuse vp 95,14 Türi-Alliku vp 100,15 Kiili vp 108,24
Seljametsa vp 95,14 Klooga vp 100,20 Kaerepere vp 108,34
Aravete vp 95,68 Sõmeru vp 100,60 Rummu vp 108,89
Pärsama vp 96,17 Kose vp 100,88
Alu vp 96,20 Kose-Uuemõisa vp 100,88
Kunda vp 97,55 Ravila vp 100,88
- 73 - | Page

Market Study - Smart Heat-1

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Market Study - Smart Heat-1

Uploaded by

Copyright:

Available Formats

Soletek OÜ

Utilizing the ESCO business

EXECUTIVE SUMMARY -5-

ENERGY EFFICIENCY MARKET -7-

ESCO BUSINESS MODELS -9-

ENERGY SUPPLY CONTRACTING (ESC) - 10 -

ESCO MARKETS IN EUROPE - 13 -

ENERGY EFFICIENCY SERVICES MARKET - 14 -

ENERGY EFFICIENCY SERVICES MARKET - 17 -

ENERGY EFFICIENCY SERVICES MARKET - 21 -

ENERGY EFFICIENCY SERVICES MARKET - 25 -

ENERGY EFFICIENCY SERVICES MARKET - 28 -

ENERGY EFFICIENCY SERVICES MARKET - 31 -

COMPANIES OFFERING SOFTWARE AND HARDWARE SOLUTIONS - 32 -

BUSINESS MODEL CASE STUDIES - 48 -

ENERGY PERFORMANCE CONTRACTING CASE STUDIES - 48 -

ANNEX 1. DEVELOPMENTS IN NATIONAL ESCO MARKETS IN EUROPE: 2007-2010 - 65 -

ANNEX 2. MARKET SEGMENTS IN WHICH THE BUSINESS MODELS WORK - 68 -

ESCO business models

Figure 2. Overall concept of ESCO’s business model

Energy Supply Contracting (ESC)

ESC ensures delivery of useful energy.

The ESCO will then deduct an

Integrated Energy Contracting (IEC)

IEC is a newly developed business

Facility Management (FM)

ESCO Markets in Europe

Business models in Sweden

Energy efficiency services market

33 National Report on the Energy Efficiency Service Business in Germany 2010

44 National Report on the Energy Efficiency Service Business in Germany 2010

Energy efficiency services market

Table 2. Status for ESCO‐contracting in Danish municipalities47

Business models in Denmark

Energy efficiency services market

Business models in Poland

Energy efficiency services market

Business models in Finland

Energy efficiency services market

Business models in Norway

Companies offering software and hardware solutions

 StruxureWare Building Operation is an

 More control over energy spend

 Integrate multiple building systems no matter the manufacturer or installer

 Investment protection through backwards compatibility guarantee

Results obtained from each of the pilot sites

Montbonnot primary school

Savoie Technolac office building

3-star hotel in Nice

Residential apartment block at Vaux-sur-Seine

 Angers96 and Moulins97 in France,

Business model case studies

Energy Savings MWh CO2 Reduction (tons)

Nyköping Community case

Energy Saving in Municipal Buildings in Small Communities in Rural Districts

Energy supply contracting case studies

Housing development Lindenhof 2114

In the Suttnerstraße/Reglinstraße complex of buildings, GeWoSüd has attached a 40 mm thick thermal

Housing development Rathausstraße115

Chauffage case studies

Villeneuve Heating plant116

Partners: Compagnie de Chauffage and Centrale de la Villeneuve. Project started in 2006.

COMPONENTS In thousands of EUR (without VAT)

Partners: City of Varna and Dalkia Bulgaria. Project started in 2007.