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Innovative business models in the
energy efficiency services market
Dr. Brian Motherway
© IEA 2017
0
2000
4000
6000
8000
10000
2000 2015
TFC
(Mto
e)
Global energy demand reduction from energy efficiency
Efficiency measures since 2000 reduced global final energy consumption by 11%, equivalent to the total
consumption of the EU.
Efficiency
savings
© IEA 2017
Efficiency in IEA’s member countries has flattened demand
Without efficiency gains energy demand in 2015 in IEA countries would have grown by 1% annually
surpassing the 2007 peak. Instead, energy demand is 1% below 2000 levels.
130
140
150
160
170
2000 2002 2004 2006 2008 2010 2012 2014
To
tal F
ina
l C
on
su
mp
tio
n (
EJ)
Energydemandwithoutefficiency
Actual energydemand
© IEA 2017
Energy efficiency is a growing investment opportunity
Investment in energy efficiency increased by 6% in 2015, led by growth in the buildings sector
53%
18%
29%
25%
13%
6%
10% 9%
9%
15%
13%
Building envelope
Heating, ventilation and
coolingAppliances
Lighting
Energy-intensive industry
Other industry
Light-duty vehicles
Freight and aviation
Buildings
Transport
Industry
USD 220 billion
Global investment in energy efficiency by sector, 2015
© IEA 2017
The ESCO market is important for energy efficiency services
The global energy services market was USD 24 billion in 2015. China’s market is growing 7% per year,
US market doubled in 10 years, EU market had small growth
United States USD 6.3 billion
European Union USD 2.7 billion
China USD 13 billion
Other USD 1.9 billion
Global energy service company revenues by country/region, 2015
© IEA 2017
What is an ESCO?
• Energy Service Company – ESCO
• Outsourcing thinking about or investing in energy supply, management and
efficiency
• An actor with some combination of expertise, time, technology and funding
• Addressing market barriers to energy efficiency opportunities
© IEA 2017
• Remote monitoring and management of energy in commercial and
industrial sites
• Often based on shared savings or performance contracting
• Becoming a common offering from energy suppliers
Outsourcing energy management
Renewable ESS Smart
Device Heat,
Cooler Pump Gas/Water
K-iEMS Server Data
Server
DDC / PLC
• Example: Korea Electric Power Corporation
- K-iEMS a branded, proprietary integrated energy
management solution
- Consolidates control and management of
equipment, including solar supply
- Claims 20% energy consumption reduction
© IEA 2017
• Upgrade or technology projects focused on energy efficiency
• Energy performance contracting – payment linked to savings
• Range of performance links from small payment hold-back to long term
revenue model
• Can include complete outsourcing of energy services
Energy performance contracting
© IEA 2017
• In many countries, utilities have legal obligations to meet energy savings
• These savings can be directly from customers, via third parties, or sometimes traded as ‘white certificates’
• Third party companies are emerging to acquire and aggregate savings projects for utilities
• Example: Effy, France
- Aggregates home efficiency upgrade projects to sell the ‘savings credits’ to utilities
- Brings the value of the energy savings credit into the transaction
- Also offers brokering services between householders and upgrade contractors
Supporting utilities to deliver energy savings
© IEA 2017
• Using technology to create reliable, real time data
• Exploiting the value of energy efficiency through a range of channels
• Opportunity to increase accuracy and enable aggregation for energy efficiency to be paid for system adequacy
Monetising energy savings
• Example: OpenEE, California:
- Paid-for-performance arrangements allowing utilities procure energy efficiency as a resource
- Sends price signal based on grid benefit by tracking time and location dependent savings
- Uses various monetisation channels
© IEA 2017
Thinking about energy as a service
London-based BBOXX delivers energy
systems to remote off-grid African
locations.
• The system is designed not to provide a
certain quantity of energy, but to deliver
the required services.
• The package includes super-efficient
lights, TV, radio and phone chargers
supplied by a solar panel with battery
storage.
• The system is charged on a monthly
service fee basis through mobile phone.
© IEA 2017
Discussion issues
• Redefining the utility
• From supply and demand to energy service
• New markets for a new commodity
• The disruptive potential of technology
• Winners and losers in change
© IEA 2017
Some regulatory challenges
• Enabling innovation
• Managing new value streams
• The utility’s business model
• Paying for infrastructure
• Distributional issues
• Stranded assets