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The Energy Service Company (ESCO) Concept

The Energy Service Company (ESCO) Concept. And EED's ambitions for the future. Essent Energie Diensten BV 8th October 2007, Deventer Reinier Heerink. Content. The ESCO Concept EED Ambitions. The ESCO concept 1-4.

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The Energy Service Company (ESCO) Concept

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  1. The Energy Service Company (ESCO) Concept And EED's ambitions for the future Essent Energie Diensten BV 8th October 2007, Deventer Reinier Heerink

  2. Content • The ESCO Concept • EED Ambitions

  3. The ESCO concept 1-4 "An ESCO is defined as a company engaged in developing, installing and financing comprehensive, performance-based facility improvement projects, typically 7-10 years in duration, centered around improving the energy efficiency and reducing maintenance costs for facilities owned or operated by customers (NAESCO,1997)"

  4. The ESCO concept 2-4 Performance Contract Structure Monitoring Costs Financing Costs Maintenance Costs Energy Costs € Before Contract During Contract After Contract

  5. The ESCO concept 3-4 Concept is an international success, Holland behind • The concept started in the 70's in the USA, first European ESCO company was founded in '82 in Italy • Holland is far behind (Why?), Essent Energie Diensten is the only organization that can be called an ESCO company. Average number of companies in Europe per country is respectively with and without Germany 60 and 12 companies (1) Source: An international Survey of the ESCO Industry, Edwar Vine, 2003

  6. The ESCO concept 4-4 Advantages of an ESCO: • Knowledge and experience • Integrator of multidisciplinary skills (project management, energy analysis, solution development, installation etc) • Innovative supplier base • Takes care of financing • Takes responsibility for risks • Savings guaranteed • Being operational guaranteed • Customer is owner so is able to deduct investment

  7. EED Ambitions 1-4 Ambitions: to penetrate and develop markets/ products New Products: Lighting, Isolation, Cooling, PCM Market Development Diversification Healthcare (cooling) Working together with Philips and Trilux (lighting) Looking for new market/product combinations Existing Products: High Efficiency Boilers, Heat Pumps, Mini-WKK's etc Current Utilities: Housing Associations Governmental Buildings Education Sports and Recreation Healtcare (in development) Market Penetration Product Development Existing Markets (Utilities) New Markets

  8. EED Ambitions 2-4 North-America (2C, 52 ESCOs) Zuid-Amerika (4C, 75 ESCOs) Charts show weighted average of turnover per marketsector Asia (7C, 224 ESCOs) Residential Commercial Industrial Agricultural Municipal Other Europe (15C, 912 ESCOs) Bron: An international Survey of the ESCO Industry, Edwar Vine, 2003

  9. EED Ambitions 3-4 Africa (3C, 24 ESCO's) Oceania (1C, 5 ESCO's) Residential Commercial Industrial Agricultural Municipal Other World (38C, 1358 ESCO's) Bron: An international Survey of the ESCO Industry, Edwar Vine, 2003

  10. EED Ambitions 4-4 EED wants to enter the Industrial Sector • Plans to enter the Industrial market as it is the biggest energy consuming sector and a much targeted sector by international ESCO's • Energy Efficiency high on political agenda • Industrial Sector most likely more complex than other sectors, therefore important to learn quick and gain first mover advantages • Statistics Netherlands (CBS) expects a huge grow of investments of the Industrial Sector (+19%). Especially the metal and electrical engineering sectors are willing to invest (+35%) • Existence of agreements between Government and business life focusing on the Industrial sector

  11. Energy services in practice In relation to Multiple Year Agreements Essent Energie Diensten BV Deventer, 8 October 2007 Ger Kempen

  12. Content What I would like to tell you • Energy services EED • Industrial project Eshuis • Multiple Year Agreements (MJA's)

  13. Energy Services EED 1-3 • Energy Contracting means to us: • Energy savings combined with more comfort and guaranteed direct lower operating costs. • Parts of the performance contract • Design optimal energy concept • Old buildings: EED finances replacement of equipment, New Buildings: EED finances surplus value of newer equipment • Energy management • Guarantee on maximum volume energy consumption with bonus 50/50 • Contract period max. 15 years, minimum investment 40K

  14. Energy Services EED 2-3 Although not (yet) being fully commercialized, EED has knowledge/ experience of: • Storage of warmth and coldness • Heat pumps • Energy efficient lighting • Heating, ventilation, isolation, compressed air • Monitoring of energy consumption • Reuse of warmth surplus • How to save energy in utilities

  15. Energy Services EED 3-3 Performance Contract Structure Monitoring Costs Financing Costs Maintenance Costs Energy Costs € Before Contract During Contract After Contract

  16. Industrial Project: Eshuis 1-5 • Characteristic features • Printing - office • Initial annual energy use: • 2.000.000 kWh electricity • 70.000 m3 natural gas • CO2 emission 1.256 tons/year • Problem: increasing cooling because of enlarged factory, 540 kW cold • Possible solutions: • - conventional cooling • - heat/cold storage

  17. Industrial Project: Eshuis 2-5 • Conventional cooling • Investment € 220.000 • Electricity increase with 500.000 kWh/year • CO2 emission 1.540 tons/year • Heat/cold storage with heat pumps • Investment € 460.000 • Electricity increase with 180.000 kWh/year • Gas decrease with 60.000 m3/year • CO2 emission 1.250 tons/year • Environmental • Reduction CO2 emission 296 tons/year 19 %, i.e.

  18. Industrial Project: Eshuis 3-5

  19. Industrial Project: Eshuis 4-5 • Advantages Eshuis: • Yearly cost the first 10 years equal conventional cooling • Advantage after 10 years, 24 % of the annual cost • Advantage investment VAMIL/ EIA 235.000 • Guaranty on working heat/cold storage • No own investment

  20. Industrial Project: Eshuis 5-5 Heat pump Dry cooler Drilling Hole

  21. Multiple Year Agreements 1-3 • Multiple Year Agreements (MJA's) • The multiple year agreements are agreements between government and professional/ business organizations concerning a more effective and efficient manner of using energy. • 900 companies • 25 branches • 36 professional/ business organizations

  22. Multiple Year Agreements 2-3 • Branches, Sectors: • Agriculture • Cultivation under glass • Services • Vocational training, Sports and recreation, Academic hospitals • Industry • Ceramic industry, Surface treating companies • Nutritional, luxury industry • Potatoe industry, Dairy industry

  23. Multiple Year Agreements 3-3 • Focus on: • Industry • Nutritional and luxury industry • Which we would like to provide our services by using our knowledge/ experiences with: • Storage of warmth and coldness • Heat pumps • Energy efficient lighting • Heating, ventilation, isolation, compressed air • Monitoring of energy consumption • Reuse of warmth surplus • New products?

  24. Workshop: How to enter the Industrial Market?

  25. Workshop • Potential Customers: Which branches of the Industrial Sector would be interested in the ESCO concept ? • Business Models: which Business Model/ Contract form is suitable? • Approach, what would you need to approach a potential customer and how would you do it?

  26. Workshop: Potential Customers • Why would they be interested? • Not willing to finance project • Lack of know-how • Wants to focus on core business • Attractive pay-back time • Corporate Social Responsibility • Outsourcing of maintenance • Outdated machinery, need for replacement • Environmental obligations • Outsourcing of risks • Guaranteed savings • …

  27. Workshop: Potential Customers • Who would be interested? Food and Beverages Textile and clothing Leather (non clothing) Wood products (no furniture) Paper Oil and Coal products Chemical products Rubber and synthetic material products Earthenware, glass, gypsum and cement products Metal Machines Electrical and Optical engineering Automotive, Aerospace Furniture and other goods • Big or small players? Aim at process or process supporting energy technology?

  28. Workshop: Business Model • Presentation of Jan W. Bleyl

  29. Workshop: Customer Approach • How would you describe the Industrial Sector from a customer point of view? • More reluctant to let an external company adjust/ influence/ study their primary process? • More likely to have "a double agenda" ? • More likely to be presumed with the idea that they can do it better and cheaper? • … • Given the nature of the Industrial Sector, what key competences would you need?

  30. Workshop: Customer Approach • In our opinion, the customer needs to trust the concept and Essent, we need proofs of concept! Start easy, start with one branche… High Must Haves Quick Wins Existing Concepts Easy Technologies Business Impact Money Pits Low Hanging Fruit Low Low Ease of Execution High

  31. The End On behalf of Essent Energie Diensten, thank you very much for your attention and input

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