Efficiency law could ‘triple’ energy services market


This article is part of our special report Energy efficient buildings : Powering Europe.

The EU's upcoming energy efficiency directive could send strong enough signals to jump-start the market in energy services for commercial buildings, industry experts told EURACTIV.

The draft bill contains the strongest incentives to date for triggering a boom in the market for energy efficiency services, according to a number of experts working in the field.

In its current form, the draft directive requires central governments to achieve a 3% renovation rate for the buildings they occupy, on a yearly basis. It also imposes an obligation on power utilities to achieve 1.5% annual energy savings among their final customers – including large commercial and public building owners.

As a result, power companies are expected to change their business model by seeking profitability in selling energy services rather than supplying energy only.

"If the final text is somewhere between what the Parliament is proposing and what the [member states] are recommending, then I think we're going to have something fairly solid," Brook Riley of green group Friends of the Earth Europe said after the latest round of 'trialogue' talks which took place between the EU's three institutions on 29 May.

This would be enough jump-start the energy efficiency services market, he added.

Market set to 'triple'

Adrian Joyce, secretary-general of EuroAce, a trade group representing companies involved in the energy savings goods and services industry, was equally optimistic. With the right incentives in place, "the demand for and supply of energy-efficiency services is set to double or even triple in five years' time," he told EURACTIV.

For Brook Riley of Friends of the Earth, only legally-binding measures will create room for the market to find the appropriate investors. "If we make it obligatory, we will have a market for energy savings," Riley said. "State guarantees is what investors need," he added, giving as an example the growing appetite for energy efficiency investments in the Unites States, where there are state-level laws to foster them.

In Europe, on example is Denmark, where the public sector played a role in guaranteeing a return on investment. As the price for fossil fuels went up, Danish company Dong Energy found that they were actually making more money from selling energy efficiency services than from selling energy itself.

This resulted in a boom for the energy efficiency services market in Denmark. Coupled with national awareness-raising campaigns and change in consumers' behaviour, this all reflected in better insulation and automation of buildings and in the end, lower energy bills.

Not everyone is applauding, however. The Danish Energy Association told EURACTIV they understand why EU governments are sceptical when it comes to funding energy-efficiency schemes, which come at a high costs for national public finances at a time when all governments are trying to cut spending.

“With energy savings, you will always experience initial costs, plus with the austerity measures taken all over the EU, it all translated into an eternal discussion of whether this investment pays off,” a spokesperson of the Danish Energy Association said.

These measures were taken in Denmark some time ago, far from an economic crisis like the one Europe is experiencing today, but during the 1970s oil crisis which pushed for urgent action. Whilst hard to introduce at first, evaluations of the Danish system have so far been positive.

Private sector already taking steps

If government incentives do help, some companies have not waited for binding laws to offer services for large commercial or public buildings owners.

“It's important for governments to offer incentives”, Maureen Lally of energy service provider Trane told EURACTIV. However, she added, many building owners are moving on their own by asking for the services of specialised companies.

An initial energy-audit shows tenants where they are wasting the most energy, and how they can save money from electricity or gas bills. “After the audit, we identify areas of improvement,” said Michel Rozendaal, energy expert for Trane. “This could mean putting controls in or more equipment or taking energy conservation measures, for example. Then we do a cost-benefit analysis and determine whether it is or not economically feasible and then we model to predict how their building will operate over time,” Rozendaal explained.

Companies like Trane have developed their analytical models over time, based on their existing projects and taking into account factors such as weather, geographical conditions, humidity, the duration of daylight and nighttime.

From the customer end, the biggest obstacle is scepticism over the period of time needed to recoup the investment. But reluctance to invest in projects with long investment-return can sometimes be addressed by experts equipped with the right tools. “There are many customers who realise they need to save energy and are looking for solutions, but also many who have no idea about the potential,” Rozendaal said.

Most investments Trane makes in fact have a two to five year payback, he added. Then, buildings start saving money from their reduced energy bills, making up entirely for the initial financial effort.

Social benefits are also considerable, experts argue. The productivity of workers increases in a better insulated, more comfortable and healthier commercial or public building, according to Adrian Joyce, energy expert for industry group EuroAce.

The efficiency of a building is also linked to the quality of its ventilation system. Better ventilated rooms make for higher comfort, better health and increased productivity, according to Ruedi Kriesi, vice-president and head of Swiss group of Minergie, a non-profit organisation that set energy labels for buildings in Switzerland and offers solutions for energy efficiency in buildings, but also certifications and education for professionals.

Comfort ventilation reduces traffic noise, prevents the creation of mould and protects the indoor environment from outside dust, Kriesi added. For some energy users, "these advantages are clearly more important than the reduced energy consumption," he said.

Europe aims to reduce its primary energy use by 20% by 2020, a target which is not legally binding.

The Energy Efficiency Directive was proposed by the European Commission in mid-2011 as part of its effort to reach this objective.

The 20% target will not be reached, unless the EU more than doubles its energy savings efforts, according to the Commission's estimates.

In its draft directive, the Commission proposed individual measures for each of the sectors that could play a role in reducing energy consumption, including a controversial obligation on energy companies to reduce their deliveries to customers by 1.5% each year.

  • 13 June: Last 'trialogue' talks between the Council, Commission and Parliament (these exclude the regular non-political, technical meetings) in this first (and possibly last) reading.
  • 1 July 2012: Cyprus takes over the EU presidency from Denmark.

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