African Development bank
The last Regulatory Indicators for Sustainable Energy (RISE) report, capturing national policy and regulatory frameworks through a set of indicators, clearly shows the lack of a favorable environment for energy efficiency (EE) markets in Africa. Except the seven leading countries1 in EE-related policies and program implementation, Africans countries need assistance in exploring EE opportunities, in building capacity of main stakeholders (public and private) and in establishment of the main pillars for EE market development. The low scores for EE in RISE are attributed particularly to the lack of commitment to energy efficiency from the public sector and utilities in addition to the absence of incentives and financing mechanisms despite the existing national-level EE planning.
To catch up on countries’ late involvement in EE and to overcome the lack of adequate policies, EE experts, project development capacity, demonstration projects and financing mechanisms, the approach of Energy Performance Contacting (EPC) seems to be the right instrument to develop the market and make a sustainable leap forward.
The establishment of a SUPER Energy Services Company (ESCO) dedicated, as a first step, to the development and implementation of EPC in the government-building sector through private ESCOs is the best approach for removing most of the main EE barriers.
WHY A SUPER ESCO?
A Super ESCO is an entity usually set up by the government2 predominantly for the public sector (public buildings, schools, hospitals, municipal facilities, street lighting, etc.). The SUPER ESCO will reach the untapped EE potential that can only be realized through a competitive facilities retrofitting with the best energy conservation measures package by ESCOs. However, in general, public procurement favors the least cost with predefined services and equipment where innovation, equipment performance, life cycle cost and financial indicators as payback period, IRR, NPV are not considered. Even if the legislation is amended to allow Energy Performance Contacting with the new evaluation indicators, public-sector entities need to have a good understanding of EPC and the required skills and knowledge to negotiate with ESCOs on the proposed projects.
THE ESTABLISHMENT OF A SUPER ESCO HAS MANY BENEFITS NOTABLY :
• Provides support for the removal of EE barriers and plays catalyzer role for EE market development and acts as technical and financial partner for both ESCOs and government entities
• Fills the gap in the lack of EE prioritization in public agencies, the limited incentives, budget, access to commercial financing and public agencies’ skills to handle EPC procurement and projects evaluation.
• Builds local ESCO market, and potentially setting up new ESCOs, through continuous technical assistance for bankable projects development by high-level skilled energy auditors.
• Gradually assist ESCOs to provide complete EPC services ranging from identification, design, implementation, commissioning, performance monitoring and guarantee to operation and maintenance.
• Provides financing to the private ESCO or support commercial finance arrangement for public EE projects. Consequently, private ESCO will faster build their capacities, credentials and an initial list of successful projects.
• Provides all required EPC documentation for procurement in terms of contract templates, guideline, measurement & verification plans, etc. for public and private sectors
The SUPER ESCO model can act as a concrete step towards the development of a mature EE market and drive private sector to invest. African countries aspiring to develop SUPER ESCOs may consider AfDB as a partner to support such initiatives.