Promoting Performance Contracts in Japan
This presentation is the property of its rightful owner.
Sponsored Links
1 / 43

Jyukankyo Research Institute PowerPoint PPT Presentation


  • 101 Views
  • Uploaded on
  • Presentation posted in: General

Promoting Performance Contracts in Japan – Cases Review –. Jyukankyo Research Institute. Hidetoshi Nakagami President,Jyukankyo Research Institute Inc. October 31,2001. Table of the Contents. 1. Introduction 2. ESCO business climate in Japan

Download Presentation

Jyukankyo Research Institute

An Image/Link below is provided (as is) to download presentation

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.


- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -

Presentation Transcript


Jyukankyo research institute

Promoting Performance Contracts in Japan

– Cases Review –

Jyukankyo Research Institute

Hidetoshi Nakagami

President,Jyukankyo Research Institute Inc.

October 31,2001


Table of the contents

Table of the Contents

1. Introduction

2. ESCO business climate in Japan

3. Implementation of ESCO projects at municipalities

4. ESCO project at Osaka Prefecture

---The first full-fledged ESCO case at municipality in Japan---

5. Conclusion


Table of the contents1

Table of the Contents

1. Introduction

2. ESCO business climate in Japan

3. Implementation of ESCO projects at municipalities

4. ESCO project at Osaka Prefecture

---The first full-fledged ESCO case at municipality in Japan---

5. Conclusion


The latest energy policy for the long term energy demand in japan

The Latest Energy Policy for the Long-term Energy Demand in Japan

(1) Prospect of the Final Energy Demand and CO2 Emissions (May, 2001)

(2) Breakdown of GHGs Reduction Target at COP3

(3) GDP Elasticity of the Final Energy Demand

(4) The Government Proposed Measures for2010Energy-Saving Target (July, 2001)


1 prospect of the final energy demand and co2 emissions may 2001

(1) Prospect of the Final Energy Demand and CO2 Emissions (May, 2001)

Target level


2 breakdown of ghgs reduction target at cop3

(2) Breakdown of GHGs Reduction Target at COP3


3 gdp elasticity of the final energy demand

Final Energy Demand annual growth ratio (%)

GDP annual growth ratio (%)

Elasticity

73/80

-0.04

3.5

-0.01

80/90

2.0

4.1

0.50

90/99

1.6

1.1

1.40

99/10

0.15

2.0

0.08

99/10

0.00

2.0

0.00

(3) GDP Elasticity of the Final Energy Demand


4 the government proposed measures for 2010 energy saving target july 2001

Management of Traffic System

(TDM , ITS)

Inter-Sector 1%

17%

Strengthen of Standard

for Factory

36%

Transport Sector

Industrial Sector

Technology Development

of Electric Vehicle

10%

30%

57Million kl

36%

Promotion of Clean-Energy

Automobile

3%

Commercial and

Residential Sector

33%

8%

Strengthen of Standard

for Appliances

10%

15%

Top-Runner Approach

Strengthen of Standard

for Housing

(4) The Government Proposed Measures for2010Energy-Saving Target (July, 2001)


Prospect for the esco as one of the energy conservation measures at office buildings

The steep increase in energy consumption will be expected in the Commercial sector.

Promotion of an Building Energy Management System (BEMS) with IT technology

Preparing circumstances to promote ESCO projects

Strengthening expansion of the regulatory action for Office buildings.

ESCO guarantees energy savings at fixed rate

Prospect for the ESCO as One of the Energy Conservation Measures (at Office Buildings)

BEMS

Measures for

office building

ESCO

Regulatory action

Energy Cost Savings by every conservation

Customer

Customer

Profits

Customer

Guarantee

Savings

ESCO

Service

ESCO

charge

Energy cost

Energy cost


Table of the contents2

Table of the Contents

1. Introduction

2. ESCO business climate in Japan

3. Implementation of ESCO projects at municipalities

4. ESCO project at Osaka Prefecture

---The first full-fledged ESCO case at municipality in Japan---

5. Conclusion


Situation of entry into the esco business member companies of jaesco

Situation of Entry into the ESCO Business (Member Companies of JAESCO)


Recognition of the esco business among medium size factories

Recognition of the ESCO Business (among medium-size Factories)


Development of the esco performance and its outlook member companies of jaesco

Development of the ESCO Performance and its Outlook (Member Companies of Jaesco)


Table of the contents3

Table of the Contents

1. Introduction

2. ESCO business climate in Japan

3. Implementation of ESCO projects at municipalities

4. ESCO project at Osaka Prefecture

---The first full-fledged ESCO case at municipality in Japan---

5. Conclusion


Recognition of the esco business among municipalities march 2001

Recognition of the ESCO Business among Municipalities (March, 2001)

Source: Survey by Ministry of Public Management, Home Affairs, Posts and Telecommunications


Recognition of the esco business among municipalities 1999 2000

Recognition of the ESCO Business among Municipalities (1999-2000)

Source: Survey by Ministry of Public Management, Home Affairs, Posts and Telecommunications


Prospect of esco implementation at municipalities

Prospect of ESCO implementation at Municipalities

Source: Survey by Ministry of Public Management, Home Affairs, Posts and Telecommunications


Table of the contents4

Table of the Contents

1. Introduction

2. ESCO business climate in Japan

3. Implementation of ESCO projects at municipalities

4. ESCO project at Osaka Prefecture

---The first full-fledged ESCO case at municipality in Japan---

5. Conclusion


Location of osaka prefecture

Location of Osaka Prefecture

Osaka Prefecture

JAPAN


Structure for implementation of the esco project

Structure for Implementation of the ESCO Project

Osaka Prefecture

Research Consignment

Public Building Division

Jyukankyo Research Institute

Consulting

(co-work with Osaka Public Building Division)

Adjustment among related divisions

- Energy Audit

- Settlement of the legal barriers

- Setting the policy line for the ESCO project

- Making the Request for Proposals

- Setting the timeline for the RFPs

- Establishment of the evaluation standards

- Making general outline of the ESCO contract

- Supporting other variety of municipal work

Section Originating Request

Medical Center Division


Objects of the energy audits

Objects of the Energy Audits

(1) Hospital A:

Osaka Medical Center and Research Institute for Maternal and Child Health

Total Floor Space:67,930㎡

(2) Hospital B:

Osaka Prefectural Rehabilitation Center

Total Floor Space:14,627㎡

(3) Market A:

Osaka Prefectural Central Wholesale Market

Total Floor Space : 45,112㎡


Results of the energy audits

Results of the Energy Audits


Settlement of the legal barriers

Settlement of the Legal Barriers

Problems to be Solved:

(1) Characterization of the ESCO Project

(2) Approval of Long-term Debt Contract

(3) Interpretation of Installment Plan and Hidden

Bond Issues

(4) Permission to Use Administrative Property

(5) Locus of Operational Management Responsibility

(6) Method to Select the ESCO


1 characterization of the esco project at osaka prefecture

(1) Characterization of the ESCO Project at Osaka Prefecture

Result of the Consideration:

ESCO project is

- Comprehensive tailor-make contract,

- Particular contract model.

It is interpreted as a procurement of Specific Services on behalf of Energy Saving Services.


2 approval of long term debt contract for the esco project

Result of the Consideration:

ESCO projects:

- Long-term contract (10-15 years).

- During the term of contract, the municipal entity needs to pay for the ESCO services every year.

Under Article 214 of the Local Authority Law, local municipal entity needs Approval of Long-term Debt Contract at Local Assembly.

(2) Approval of Long-term Debt Contract for the ESCO Project


3 1 interpretation of installment plan and hidden bond issues

Result of the Consideration:

Under Municipal guidance on application of debt:

Municipal entities should pay for its procurement within a purchased year from the prepared budget.

Inappropriate extension of the payment term could be illegal and called “hidden bond.”

However, there are certain types of goods and services that could be procured.

(3) -1 Interpretation of Installment Plan and Hidden Bond Issues


3 2 interpretation of installment plan and hidden bond issues

(3) -2 Interpretation of Installment Plan and Hidden Bond Issues

Result of the Consideration:

Under the present circumstances:

- Only limited amount of debt to be issued each year.

- Hard to utilize the debt for such ESCO projects.

- However, Osaka prefecture successfully interpreted ESCO project as a procurement of ESCO services, which will be provided under a comprehensive tailor-make contract, including design & construction and guarantee for energy savings


4 1 permission to use administrative property

(4) -1 Permission to Use Administrative Property

Result of the Consideration:

Shared Savings Contract scheme:

- During the contract term, all ESCO equipment is owned by the ESCO

- This means that private company’s property is placed in the municipal site.

- Needs for The ESCO to apply for permission to use administrative property and pay the use fee for it.

- Possibility of reduction or exemption for the fee, though, it needs to be given more consideration.


4 2 permission to use administrative property continued from previous page

(4) -2 Permission to Use Administrative Property (continued from previous page)

Reference of the Consideration:

* Article 238-4 of the Local Autonomy Law:

management and disposition of the administrative property

* Article 225 of the Local Autonomy Law: Use fees

* Municipal Ordinances on behalf of reduction and exemption of the fees for the use of administrative property

* Municipal Regulations on behalf of the standards for the reduction and exemption of the fees for the use of administrative property

* Legislation Supporting PFI (PFI=private finance initiative)


5 locus of operational management responsibility

Result of the Consideration:

ESCO Service :

Operation and maintenance of the facility,

Municipality :

- Employees are responsible for management of the buildings.

- Municipalities are unlikely to let private companies be completely responsible for the public facilities.

Municipality : The existing equipment

ESCO : The newly installed ESCO equipment.

(5) Locus of Operational Management Responsibility


6 1 method to select the esco

(6) -1 Method to Select the ESCO

Two Options:

The cost and the energy saving effect depends on each ESCO’s proposals and low-budget proposal would not necessarily bring the best benefit for the municipal entity.

Applying general competitive bidding for the ESCOs is inappropriate. Among other ways of supplier selection, two types could be considered to apply for the ESCO projects at municipalities; (1) competitive bidding system with comprehensive evaluation, and (2) proposal method and negotiated contract.


6 2 method to select the esco continued from the previous page

Option A: Competitive Bidding System with Comprehensive Evaluation

The enforcement order under Local Autonomy Law (*1) allows competitive bidding system with comprehensive evaluation. However, this selection method is only applied within the limits of the estimated price for contract, and the municipal entity needs to specify the detail of the project beforehand at certain degree.

This method is inappropriate to have ESCO proposals with ingenuity and uniqueness. (*1: Article 167-10-2)

(6) -2 Method to Select the ESCO (continued from the previous page)


6 3 method to select the esco continued from the previous page

Option B: Proposal Method and Negotiated Contract

This system is to invite public participation for the ESCO proposals without any prior specification of the detail by the municipal entity. Among the participation, the municipal entity may enter into a private contract with the best ESCO based on the objective evaluation applied to the submitted design proposals.

Compared with other supplier selection methods, this one could be the most appropriate ordering system, which enable procurement of flexible and effective ESCO proposal.

Problem with this method. (TO (6)-4)

(6) -3 Method to Select the ESCO (continued from the previous page)


6 4 method to select the esco continued from the previous page

(6) -4 Method to Select the ESCO (continued from the previous page)

Problem withProposal Method and Negotiated Contract:

Even though the Proposal Method and Negotiated Contract seems appropriate, there remains an issue with giving a reason of the private contract. Local Autonomy Law and Accounts Law limit to exclusive cases to be able to apply this method. Such exclusive cases are;(1) competition is not effective according to the nature and the aim of the contract, (2) there is an urgent needs for the procurement, (3) there is no participants, (4) winning bidder doesn’t enter into the contract, etc….


6 5 method to select the esco continued from the previous page

(6) -5 Method to Select the ESCO (continued from the previous page)

Result of the Consideration:

Osaka Prefecture adopted Proposal Method and Negotiated Contract with a careful consideration, giving a reason of the procurement of ESCO services, which require special skills and track down the supplier, according to the Exceptional Government Ordinance(*1) .

(*1: Article 10-1-1)


Policy line of the esco project at osaka prefecture

Policy Line of the ESCO Project at Osaka Prefecture


Timeline from rfps to conclusion of the contract

Timeline from RFPs to Conclusion of the Contract


Evaluation of the esco proposals the real one

Evaluation of the ESCO Proposals (the Real One)


Evaluation items for esco proposals

Evaluation Items for ESCO Proposals

  • - Past Performance on Other ESCO Projects

  • - Greater Annual Profit for the Municipality during the Contract

  • Term

  • - Greater Total Profit for 15 Years

  • - More than 10% of Energy Saving Rate for Total

  • - Greater Effect on CO2 Reduction and Environmental

  • Improvement

  • - Greater Amount of the Guaranteed Energy Savings

  • - Financial Credibility and Ability to Access Long-term

  • Financing

  • - Shorter Contract Term


Payment condition

Payment Condition


Table of the contents5

Table of the Contents

1. Introduction

2. ESCO business climate in Japan

3. Implementation of ESCO projects at municipalities

4. ESCO project at Osaka Prefecture

---The first full-fledged ESCO case at municipality in Japan---

5. Conclusion


Operational issues

Operational Issues

Adjustment among the interests of the various related departments and agencies within the municipal entity

Increase in overall project cost due to procedure for permission to use administrative property and the use fee

No consideration for consigning operation and maintenance of the existing equipment to the ESCO

No authorization for operation manual for the existing equipment provided by the ESCO

Lack of incentives for the ESCO to achieve more Energy Savings due to absence of the Bonus clause

Preferential treatment for the local companies


Task for the future

Task for the Future

To encourage further implementation of ESCO projects at Municipal entities, such problems below need to be solved:

Further study for the procedure based on the Legislation Supporting PFI

Problem solving of the needs for identifying quotation of the project cost in advance

Reduction or Exemption measures for the fee to use administrative property

Simplification of the process of RFPs


  • Login