Energy saving performance contracts: public lighting versus building Frédéric Bougrain.

Content 2 1. Definition 2. Case studies – methodology 3. Main characteristics of the contracts 4. Main results 5. Challenges for integrated solutions providers 6. Conclusion ICE - 24 septembre ESH

1/ Definition 3 “Energy performance contracting means a contractual arrangement between the beneficiary and the provider of an energy efficiency improvement measure, verified and monitored during the whole term of the contract, where investments (work, supply or service) in that measure are paid for in relation to a contractually agreed level of energy efficiency improvement or other agreed energy performance criterion, such as financial savings” (DIRECTIVE 2012/27/EU on energy efficiency – art. 2 (27))

2/ Case studies - methodology 4 ESPC for public lighting o face to face interviews with lawyer, public authorities, service integrators ESPC for high schools o follow-up of two contracts for three years – interviews and meetings with project managers (public and private sides), consultants, operators, users; o project financed by ADEME and CSTB. Within CSTB collaboration between two divisions: “Energy and Environment” and “Economics and Social Sciences”.

3/ Main characteristics of the contracts 5 Public lightingRegion CentreRegion Alsace Scope2 cities18 high schools (330000m²)14 high schools (280000m²) Contract period20 years15 years20 years Global investment86 M€80 M€ (with taxes)77 M€ (with taxes) Procurement process PPP with a competitive dialog in 3 rounds Organisational structure Integrated service provider Special project vehicle GoalReduction of the power by 38% + cumulated energy consumption of 94GWh Reduction of final energy consumption by 42% and greenhouse gas emissions by 58% Reduction of primary energy consumption by 34% and greenhouse gas emissions by 65% Main renovation works change 70% of the existing lights within 3.5 years Insulation works, optimisation of energy systems Wood boilers, photovoltaic cells, optimisation of energy systems, insulation works

4/ Main results Public lightingESPC (Centre)ESPC (Alsace) Innovative solutions New technic for civil engineering (approach used for fibber optic in the countryside) + centralised control station + new organisation and services centralised control station + new organisation (development of new capabilities) centralised control station + new relationship with specialised component supplier Whole Life cycleIntegrated design in order to achieve higher energy savings Intensity of user involvement Communication with the municipalities and the residents before the works Actions to promote environmental awareness (all users are targeted: children, professors, administrative employees) during the operation of the building UncertaintyAverage during the works – limited in operation Strong during the renovation and in operation Financial resultsGainsLosses (penalties + energy target is not reached) In equilibrium PAGE 6

7 To develop new solutions by seeing the problem from the user’s perspective To manage fluid boundaries To design clear contractual agreements To define new business structures and cultures around the provision of integrated solutions 5/ Challenges for integrated solutions providers (Davies, 2001)

6/ Conclusion 8 Firms intending to shift to integrated business models need to rethink the value chain and to develop new capabilities; Energy performance is the driver of life cycle cost approaches; Integrated solutions require to develop new partnerships and to integrate the users in the project; The help desk and a centralised control station are the backbone of the projects in operation; Firms encounter cultural difficulties to integrate design, construction and operation (construction is not anymore at the core of the value chain).

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