Investment in improving the energy efficiency of buildings is widely acknowledged as a high-potential and cost-effective means of improving Europe’s Energy security, reducing operating costs, reducing CO2 Emissions and creating jobs. Studies have indicated that such investment is one of lowest cost means of CO2 emissions reduction available, yielding better returns on investment than many alternative technologies.
To achieve EU energy and climate change objectives energy efficiency and renewable energy in the built environment needs to be further developed. A substantial part of this potential lies at local level in cities and towns, notably buildings, urban transport and local energy. Urban areas account for about 70% of the total primary energy demand in the EU.
The city council of Modena joined the Covenant of Mayors in January 2010 and developed a Sustainable Energy Action Plan for the Municipality of Modena with the support of come2CoM. The document included input from different stakeholders, public and private, to achieve the commitment of the Covenant of Mayors to reduce the CO2 emissions by 20% in 2020. Cities and municipalities are often constrained by lack of finance, so to change the Covenant of Mayors commitment from targets into concrete actions the municipality of Modena had to look for alternative financing solutions.
Energy Performance Contracting (EPC) offered the municipality of Modena a solution to start on the road to achieving 2020 targets. An EPC is a performance-based procurement method and financial mechanism for building renewal. Utility bill savings resulting from the installation of new building systems that reducing energy use, pay for the cost of the building renewal project. A “Guaranteed Energy Savings” Performance Contract obligates the contractor, a qualified Energy Services Company (ESCO), to pay the difference if at any time the savings fall short of the guarantee.
To finance the project Modena AESS applied for ELENA funding to support Local Authorities in the Province of Modena implement energy efficiency projects. ELENA is a technical assistance facility managed by the European Investment Bank (EIB) and funded by EU budget. Projects seeking funding must incorporate energy efficiency, local renewables and clean urban transport.
In a recent interview with ManagEnergy, Caludia Carani of Modena AESS spoke about Modena AESS project, its successes to date and what needs to be in place for other municipalities to successfully to replicate these successes.
The project included PV plants on publicly owned roof tops, energy retrofitting of public buildings to improve the energy efficiency and enhancing the energy efficiency in street lighting within a number of municipalities in the Province of Modena. The project value is $72 million and will be completed by August 2014. The project targets are:
- Energy savings: 17,200 MWh
- Energy produced by renewable sources: 12,200 MWh
- CO2 saved: 9,900 tCO2/y
To date interim results show that solar PV is providing 400kWp, 29 buildings have had their heating systems upgraded to biomass boilers, 16m2 of solar thermal collectors has been installed and 11% of public lighting has been upgraded to low energy standards. The next phase of the project will increase solar PV production to 3,610 kWp, upgrade the over 16,000 lights spots and include the installation of 4,800 m2 external insulation and 500m2 of solar thermal collectors.
According to Carani “the scale of projects is a major barrier for energy agencies and local authorities applying for ELENA funding”. The EIB through ELENA expect investments of at least €30 million in energy efficiency and renewable projects. This means that small local authorities must partner with other agencies in order to achieve the size of project and scale of investment required.
Carani advises “energy agencies to identify a contracting authority at provincial level to simplify the procedure of applying for EIB ELENA funding”. Energy agencies play an important role in finding projects at regional level, they also tend to have project management experience at European level, as such they are best placed to apply for ELENA funding.
If energy agencies can share project risks with local authorities through, for example, providing up to or over 10% co-financing and assistance with project implementation 2020 climate goals will be achieved.
The project encountered some difficulties within the Local Administration in “managing and in understanding the real potential of EPC contacts”. The existence of long running contracts with energy management companies for buildings and public lighting meant that much negotiation was needed before any upgrade works could take place. However, the process has yielded many benefits, not only saving energy and reducing emissions, but increasing capacity within Local Authorities where ELENA calls were developed. Interest increased and attitudes have changed towards the EPC call for tender and EPC contract management within Local Authorities.
The replication potential of this project for other municipalities is considerably high, particularly in Italy. The use of ESCOs under a performance contracting scheme is a replication of experiences in other EU member states.
Much action is needed if Europe is to reach 2020 climate and emissions targets and in light of tight budgets in the European public sector and the lack of available finance, ESCOs under performance contracting provide a good solution to fund energy efficiency and renewable energy works in the cities, towns and municipalities.