D2.4 Country Report on Identified Barriers and Success ... · The present report aims at providing...

D2.4 Country Report on Identified Barriers and

Success Factors for EPC Project Implementation

SLOVENIA

Transparense project This document has been conducted within the framework of project “Transparense – Increasing Transparency of Energy Service Markets” supported by the EU program “Intelligent Energy Europe”

www.transparense.eu

Date November 2013 Place Ljubljana, Slovenia Author Damir Staničić [email protected] Jozef Stefan Institute, Energy Efficiency Centre Jamova 39, 1000 Ljubljana Slovenia http://www.rcp.ijs.si/ceu/

Disclaimer

The sole responsibility for the content of this report lies with the authors. It does not necessarily reflect the opinion of the European Union. Neither the EACI nor the European Commission are responsible for any use that may be made of the information contained therein.

mailto:[email protected]

http://www.rcp.ijs.si/ceu/

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Country Report on Identified Barriers and Success

Factors for EPC Project Implementation - Slovenia

Contents

ABBREVIATIONS ............................................................................................................................... 2

LIST OF FIGURES ............................................................................................................................... 2

LIST OF TABLES ................................................................................................................................. 2

1 SUMMARY ................................................................................................................................... 3

2 INTRODUCTION ........................................................................................................................ 3

2.1 Methodology .......................................................................................................................................... 3

2.2 What is Energy Performance Contracting ................................................................................................ 4

2.3 Definition of EPC and EPC provider ......................................................................................................... 5

3 THE EPC MARKET IN SLOVENIA: AN INTRODUCTION ................................................. 7

4 LEGISLATIVE FRAMEWORK ............................................................................................... 10

5 IDENTIFIED BARRIERS ........................................................................................................ 12

5.1 Regulatory and administrative barriers ................................................................................................. 13

5.1.1 General regulatory barriers................................................................................................................ 13

5.1.2 Regulatory and administrative barriers in the public sector.............................................................. 13

5.2 Structural barriers ................................................................................................................................. 14

5.3 Financial barriers .................................................................................................................................. 14

6 SUCCESS FACTORS ................................................................................................................ 16

6.1 Successful regulatory models ................................................................................................................ 16

6.2 Successful structural models ................................................................................................................. 17

6.3 .Successful financing models ................................................................................................................. 17

REFERENCES .................................................................................................................................... 18

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Abbreviations

CHP: Combined Heat and Power

EPC: Energy Performance Contracting

ESC: Energy Supply Contracting

IEC: Integrated Energy Contracting

IEE: Intelligent Energy Europe

JRC: Joint Research Centre

LFI: Local Financing Institution

ESCO: Energy Service Company

EED: Energy Efficiency Directive

EESI: European Energy Service Initiative, IEE Project from 2009-2012

JSI: Jozef Stefan Institute

NEEAP: National Energy Efficiency Action Plan

M&V: Measurement and Verification

RES: Renewable Energy Sources

SME: Small and Medium Enterprise

TPF: Third Party financing

Ur. l. RS: Official Gazette of the Republic of Slovenia

List of Figures

Figure 1 EPC projects by building types ..................................................................................... 9

Figure 2 Identified main barriers to the EPC business ............................................................. 12

Figure 3 Main drivers of the EPC business in Slovenia ............................................................. 16

List of Tables

Table 1 ESCOs with focus on EPC in Slovenia ............................................................................. 8

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1 Summary

The present report aims at providing an overview of the existing EPC market in Slovenia. The

report focuses on identified barriers and success factors for the implementation of EPC

projects.

The report is building on the data and information gathered by two other similar projects,

the European Energy Service Initiative1 (EESI) and the ChangeBest project2. It is also intended

as a continuation on the work of the European Commission’s Joint Research Centre –

Institute for Energy, and more particularly on its 2010 Status Report on Energy Service

Companies Market in Europe3 and some results of the 2012 JRC ESCO Survey, which will be

used for the next European ESCO 2012 report4.

2 Introduction

2.1 Methodology

The contents of this report are based on two main sources:

the results of a nation-wide EPC survey which was sent to the country's main actors

within the EPC market

the market knowledge of the authors, as well as research from local / national

literature (publications and studies, legislation documents, official statistics and

databases)

The first step in collecting the data used in this document was to distribute a survey focused

on Energy Performance Contracting (EPC) to the country's most relevant energy services

companies and finance houses. The survey contained questions around four main areas:

existing ESCOs and national EPC market

EPC models

financing models

policy initiatives

1 http://www.european-energy-service-initiative.net/eu/toolbox/national-reports.html

2 http://www.changebest.eu/index.php?option=com_content&view=article&id=43&Itemid=10&lang=en

3 http://iet.jrc.ec.europa.eu/energyefficiency/sites/energyefficiency/files/escos-market-in-europe_status-report-2010.pdf

4 Correspondence JRC – JSI, 2013

http://www.european-energy-service-initiative.net/eu/toolbox/national-reports.html

http://www.changebest.eu/index.php?option=com_content&view=article&id=43&Itemid=10&lang=en

http://iet.jrc.ec.europa.eu/energyefficiency/sites/energyefficiency/files/escos-market-in-europe_status-report-2010.pdf

http://iet.jrc.ec.europa.eu/energyefficiency/sites/energyefficiency/files/escos-market-in-europe_status-report-2010.pdf

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The answers were then analysed and the results are presented in this report in aggregated

form.

The survey was sent to 7 ESCOs and 4 financial institutions. Responses were received from 8

of them, 6 from ESCOs and 2 from financial institutions. Despite relatively low number of

responses analysed, the survey results can be considered representative as almost all ESCOs

and financial institutions with the EPC track record have provided their input. The report

does not rely only on the survey responses, but also on additional information gathered by

the authors in order to present a thorough and up-to-date picture of the state of the EPC

market in Slovenia.

2.2 What is Energy Performance Contracting

Energy performance contracting (EPC) is when an energy service company (ESCO) is engaged

to improve the energy efficiency of a facility, with the guaranteed energy savings paying for

the capital investment required to implement improvements. Under a performance contract

for energy saving, the ESCO examines a facility, evaluates the level of energy savings that

could be achieved, and then offers to implement the project and guarantee those savings

over an agreed term.

A typical EPC project is delivered by an Energy Service Company (ESCO) and consists of the

following elements:

Turnkey Service – The ESCO provides all of the services required to design and

implement a comprehensive project at the customer facility, from the initial

energy audit through long-term Measurement and Verification (M&V) of project

savings.

Comprehensive Measures – The ESCO tailors a comprehensive set of measures to

fit the needs of a particular facility, include energy efficiency and in addition, can

include renewables, distributed generation and water conservation.

Project financing – The ESCO arranges for long-term project financing that is

provided by a third-party financing company, typically in the form of a bank loan.

Project Savings Guarantee – The ESCO provides a guarantee that the savings

produced by the project will be sufficient to cover the cost of project financing for

the life of the project.

Energy Performance Contracting allows facility owners and managers to upgrade ageing and

inefficient assets while recovering capital required for the upgrade directly from the energy

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savings guaranteed by the ESCO. The ESCO takes the technical risk and guarantees the

savings.

The ESCO is usually paid a management fee out of these savings (if there are no savings,

there is no payment) and is usually obligated to repay savings shortfalls over the life of the

contract. At the end of the specific contract period the full benefits of the cost savings revert

to the facility owner.

The methodology of Energy Performance Contracting differs from traditional contracting,

which is invariably price-driven. Performance contracting is results-driven: ensuring quality

of performance. ESCOs search for efficiencies and performance reliability to deliver

contractual guarantees.

2.3 Definition of EPC and EPC provider

While there is a vast number of definitions of EPC within Europe, within Transparense

project we use the EU wide definition provided by the Energy Efficiency Directive5 (EED):

“ ‘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;”.

At the same time, within Transparense project, the focus will be given to the EPC projects,

where the above mentioned ”contractually agreed level of energy efficiency improvement”

is guaranteed by the EPC provider6. This is in line with the EED, as in its Annex XIII,

guaranteed savings7 are listed among the minimum items to be included in energy

performance contracts with the public sector or in the associated tender specifications.

Moreover, in the article 18 of EED, Member States are required to promote the energy

services market and access for SMEs to this market by, inter alia, disseminating clear and

easily accessible information on available energy service contracts and clauses that should

be included in such contracts to guarantee energy savings and final customers’ rights.

5 Directive 2012/27/EU of the European Parliament and of the Council on energy efficiency, amending Directives 2009/125/EC and 2010/30/EU and repealing Directives 2004/8/EC and 2006/32/EC was approved on 25 October 2012.

6 Guarantee of energy efficiency improvement is defined by EN 15900:2010 as ”commitment of the service provider to achieve a quantified energy efficiency improvement”.

7 Annex XIII of the EED lists the minimum item as: „Guaranteed savings to be achieved by implementing the measures of the contract.“

6



Further, within the Transparense, we define the companies providing EPC as follows:

“ ‘EPC provider’ means a natural or legal person who delivers energy services in the form of

Energy Performance Contracting (EPC) in a final customer’s facility or premises”.

Such definition respects the fact that EPC is only one type of energy services, and is in line

with the definition of the energy services provider specified in the EED (for its definition see

the glossary at the end of the report). Within the Transparense texts, we use the commonly

used term “ESCO” as equivalent of the energy service provider.

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3 The EPC market in Slovenia: an introduction

The EPC market in Slovenia is small and not fully developed. The first EPC contract in

Slovenia was signed in the year 2007, underpinned by positive experience of local ESCO

pioneering the ESC since 2001. During the period 2012-2013 a significant increase in the

market activity and the number of players has been seen: the number of EPC projects has

grown from 2-3/year to more than 15 in 2013 and the number of registered ESCOs has

grown from 2-3 to 7-8 (JSI 2013a). The EPC market is not yet competitive, considering limited

number of ESCOS with EPC track record, often playing a role of the EPC project facilitator.

There is no ESCO association in Slovenia.

The current size of the market is estimated to be €3 million/year, and short term market

potential €30 million of annual investments, according to the JSI information from the

energy saving obligation scheme, renewable and highly efficient CHP electricity feed-in

scheme, ELENA technical support to the City of Ljubljana8 for the implementation of ESC and

EPC projects and planned financing from structural funds.

A growth of the EPC market volume is expected as a result of EED requirements, too. The

development is foreseen to be driven mainly through the public sector. According to the

second National Energy Efficiency Action Plan 2011-2016 (NEEAP 2011) highest economical

energy saving potential till the year 2020 exists within the residential sector (2 TWh) and

industry (2.5 TWh), both with no or low level of implemented EPC projects (Transparense

survey 2013). The saving potential for public buildings seems to be low (0.8 TWh), compared

to these two sectors, indicating needed development of sector specific EPC framework and

solutions.

There are several energy efficiency support programs in place, but only energy efficiency

saving obligation scheme is directly providing subsidies for the EPC projects and to ESCOs.

The main problem with other energy efficiency programs is that ESCOs are not eligible to

apply for the financial support. Beside energy efficiency saving obligation scheme, the

8 Total planned investments cost is € 50,7 million EUR (2013-2016). ESCOs will contribute the majority (79%) of planned financing resources (TPF). The City of Ljubljana will participate with 14% of the financing needed, out from the municipality budget. Remaining 7% of the needed resources will be provided from other sources (Eco Fund, Cohesion found). Non ESCOs financing will be used for co-financing projects with the payback time not feasible for ESCOs (more than 15 years, mainly for building measures). Some foreign ESCO interest has been already noticed due to planned volume of investments.

8



electricity feed-in scheme is indirectly improving economic efficiency of integrated energy

contracting projects (IEC9 = EPC + ESC) on the basis of electricity feed-in tariff or premium.

Three local ESCOs are identified as EPC services providers in Slovenia10 and for two of them

classified as small ESCOs (up to 50 employees) the EPC is their core business. The quality

development of ESCO market is not supported by standardisation or certification; however

ESCOs services are scrutinized indirectly through energy efficiency requirements being

crucial evaluation criteria for funding out of aforementioned programs. ESCOs with focus on

EPC are listed in Table 1 below.

ESCOs with EPC track record ESCOs with mainly ESC track record

& new providers of EPC or ESC

Name Type11

Name Type

ELTECH Petrol, d.o.o.

energy consulting and

equipment supply

company

ENERGEN, d.o.o.

energy consulting and

equipment supply

company

Petrol, d.d.

trading company

(wholesale) & energy

distribution company &

energy supply company

Javna razsvetljava, d.d. lighting utility

GGE, d.o.o. energy consulting

company

Gorenjske elektrarne,

d.o.o.

energy supply

company

Istrabenz plini, d.o.o. energy distribution

company

Source: Transparense 2013

Table 1 ESCOs with focus on EPC in Slovenia

The overall structure of the energy contracting market has changed considerably in the

period 2012-2013 with introduction of the energy efficiency saving scheme: the market

share of EPC increased from 10% to 40%, and the ESC market share felt respectively. The

dominating business model is shared savings model. In terms of number of EPC projects

started in the last 24 months, two of the EPC ESCOs taking part in the survey stated that they

have started with “6-10” EPC projects, only one stated “>20” projects.

9 For details, please see discussion paper Integrated Energy Contracting (IEC) A new ESCo Model to Combine

Energy Efficiency and (Renewable) Supply in large Buildings and Industry (http://www.grazer-ea.at/eesi/upload/download/diskussionspapiere/091023_bleyl_integrated_energy_contracting_discussion_paper.pdf)

10 Two of these ESCOs currently offer EPC to customers at Croatian, Serbian and Bosnia and Herzegovina

market. 11

According to the IEE project ChangeBest (http://www.changebest.eu/index.php?lang=en)

http://www.grazer-ea.at/eesi/upload/download/diskussionspapiere/091023_bleyl_integrated_energy_contracting_discussion_paper.pdf



http://www.changebest.eu/index.php?lang=en

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The EPC clients generally come from public sector, Figure 1. Projects are financed through

ESCOs' own equity financing, TPF with banks lending to ESCOs and energy efficiency saving

obligation scheme subsidy.

Figure 1 EPC projects by building types

0

1

2

3

4

Number of EPC ESCOs

Source: Transparense Survey, JSI 2013 (n=3)

Some local energy agencies12 started to play an important role in the EPC market helping

municipalities to prepare EPC projects, conduct public procurement for EPC services and

monitor EPC projects implementation and results. At the same time they act as EPC market

facilitators providing EPC information, documents and supporting relevant ministries in

development of the EPC program designed in the second NEEAP which has introduced

request for intensified comprehensive refurbishment of the public buildings using advanced

forms of energy efficiency services, such as EPC and IEC. The government also plans to use

the EU Cohesion Fund financing for building refurbishment measures with long payback

periods that are not interesting for ESCOs, but which provide additional value (JSI 2013b).

12

http://www.golea.si/en/intro; http://www.energap.si/

http://www.golea.si/en/intro

http://www.energap.si/

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4 Legislative framework

Legal documents relevant for the EPC are:

Energy Act (Energetski zakon /EZ/, Ur. l. RS, št. 79/1999, 8/2000, ): This Act lays down the (a)

principles of energy policy, (b) electrical and natural gas energy market operation rules, (c)

transportation of carbon dioxide through distribution network pipelines, (d) dealing with

clients’ complaints, (e) manner and form of providing public services in the energy sector, (f)

principle of secure supply and efficient use of energy, (g) encouraging the use of renewable

energy sources, (h) eco-design requirements for products related to energy, (i) energy

efficiency labelling thus indicating energy consumption and other product characteristics

which are important for their energy efficiency, (j) conditions for the operation of energy

plants, (k) conditions for the performance of energy sector activities as well as (l, m) it

regulates the licence and energy permit issue and the bodies performing administrative

tasks under this Act. It transposes a number of EC Directives into the law of the Republic of

Slovenia, including Directive 2009/28/EC (of the European Parliament and of the Council of

23 April 2009 on the promotion of the use of energy from renewable sources and amending

and subsequently repealing Directives 2001/77/EC and 2003/30/EC) and Directive

2010/31/EU (of the European Parliament and of the Council of 19 May 2010 on the energy

performance of buildings).

Note: Energy Act (Energetski zakon, EZ-1), which is being under revision (state: Oct

2013), will transpose also Directive 2012/27/EU of the European Parliament and of

the Council of 25 October 2012 on energy efficiency, amending Directives

2009/125/EC and 2010/30/EU and repealing Directives 2004/8/EC and 2006/32/EC.

Public Private Partnership Act (Zakon o javno-zasebnem partnerstvu /ZJZP/, Ur. l. RS, št.

127/2006): main legal framework for the implementation of EPC in public sector

Public Procurement Act (Zakon o javnem naročanju /ZJN-2/, Ur. l. RS, št. 128/2006,

16/2008, 19/2010, 18/2011, 43/2012 Odl.US: U-I-211/11-26, 90/2012, 12/2013-UPB5

Decree on energy savings at end-users (Uredba o zagotavljanju prihrankov energije pri

končnih odjemalcih, Ur. l. RS, št. 114/2009, 22/2010-EZ-D, 57/2011): energy efficiency saving

obligation scheme

Rules on the methods for determination of energy savings at end-users (Pravilnik o

metodah za določanje prihrankov energije pri končnih odjemalcih; Ur.l. RS, št. 4/2010,

62/2013)

Decree on support to electricity produced from renewable energy sources (Uredba o

podporah električni energiji, proizvedeni iz obnovljivih virov energije, Ur. l. RS, št. 37/2009,

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53/2009, 68/2009, 76/2009, 17/2010, 94/2010, 43/2011, 105/2011, 43/2012, 90/2012 ):

priority for feeding-in electricity from RES into the grid; guaranteed feed-in tariffs or

premium over the period of 15 years

Decree on support to electricity produced in highly efficient combined heat and power

(Uredba o podporah električni energiji, proizvedeni v soproizvodnji toplote in električne

energije z visokim izkoristkom, Ur. l. RS, št. 37/2009, 53/2009, 68/2009, 76/2009, 17/2010,

81/2010): priority for feeding-in electricity from CHP into the grid; guaranteed feed-in tariffs

or premium over the period of 10 years

Rules on efficient use of energy in buildings (Pravilnik o učinkoviti rabi energije v stavbah;

Ur. l. št. RS, 93/2008, 47/2009, 52/2010): heating, ventilation, cooling, air-conditioning,

preparation of hot water and lighting

Technical Guideline Efficient Use of Energy (Tehnična smernica TSG-1-004:2010 Učinkovita

raba energije): requirements for efficient use of energy in new and existing buildings going

through major renovation, calculation methodology,

http://www.arhiv.mop.gov.si/fileadmin/mop.gov.si/pageuploads/zakonodaja/prostor/gradit

ev/TSG-01-004_2010.pdf

Rules on feasibility study of alternative energy systems for energy supply in buildings

(Pravilnik o metodologiji izdelave in vsebini študije izvedljivosti alternativnih sistemov za

oskrbo stavb z energijo, Ur.l. RS, št. 35/2008): obligation to analyse possible use of RES, CHP,

heath pumps and district heating for energy supply of new or refurbished buildings with with

a total useful floor area over 1000 m2

Regulation of methodology and obligatory contents of local energy concepts at the

municipality level (Pravilnik o metodologiji in obveznih vsebinah lokalnih energetskih

konceptov; Ur. l. RS, št. 74/2009, 3/2011)

The main source of legal documents listed is the information portal http://www.energetika-

portal.si/predpisi/ devoted to the energy sector. In the framework of the IEE EESI project

(2009-2012), a national set of standardised and successfully applied EPC legal documents,

including relevant manuals, guidelines and tendering documentation, has been provided for

download on the following website: http://www.european-energy-service-

initiative.net/si/standardni-dokumenti.html. Next to the national legal regulations, ESCOs in

Slovenia stress the importance of international standard ISO 50001:2011 – Energy

Management System - Requirements with guidance for use (04/2012) for the quality

implementation of EPC projects and faster development of the national EPC market.

http://www.arhiv.mop.gov.si/fileadmin/mop.gov.si/pageuploads/zakonodaja/prostor/graditev/TSG-01-004_2010.pdf

http://www.arhiv.mop.gov.si/fileadmin/mop.gov.si/pageuploads/zakonodaja/prostor/graditev/TSG-01-004_2010.pdf

http://www.energetika-portal.si/predpisi/

http://www.energetika-portal.si/predpisi/

http://www.european-energy-service-initiative.net/si/standardni-dokumenti.html

http://www.european-energy-service-initiative.net/si/standardni-dokumenti.html

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5 Identified Barriers

Within the Transparense ESCO survey (2013), the main identified barriers in terms of EPC,

Figure 2, are:

Regulation/Lack of support from the government

Complexity of the concept/Lack of information

Lack of trust in the ESCO industry

Complex accounting/book-keeping rules

These barriers can be characterised as “high risk perception” barriers type.

Figure 2 Identified main barriers to the EPC business

Source: Transparense Survey, JSI 2013 (n=3) Recent analysis of the EPC market (JSI 2013b) has shown that there are some barriers, which have been removed temporarily and not in a systematic way such as:

0

1

2

3

Num. of EPC ESCOs

13



financial incapacity of the market - SMEs ESCOs having problem to raise affordable

third party finance (on-balance sheet debt financing)

high EPC projects implementation transaction costs, especially for smaller projects

lack of trained staff for preparation, implementation and M&V of EPC projects on the

client’s side

A general overview of EPC barriers at the EU level is given in the EESI Aggregated European

Position Paper13. These barriers can be considered as a whole immanent to the Slovenian

EPC market14. Some recently observed (2012-2013) specific barriers, according to category

(regulatory and administrative barriers, structural barriers, financial barriers) and

predominantly in the public sector are provided.

5.1 Regulatory and administrative barriers

5.1.1 General regulatory barriers

The national energy legislative framework is not directly addressing or supporting the EPC

which often leads to judicial activism. The ESCOs providing EPC have developed their “own

know-how” how to avoid grey areas. General solutions were presented to the relevant

ministries which unofficially agree with them; however the implementation risk remains high

due to possible ambivalent interpretation of the relevant legislation.

5.1.2 Regulatory and administrative barriers in the public sector

The EPC in public sector is performed in the framework of the Public Private Partnership Act

and in line with Public Procurement Act, both introducing high level of complexity into the

EPC implementation process and consequently increasing costs. Due to lack of specific

knowledge and scarce human resources available in the sector, there is a permanent need

for competent advice from a kind of centralised EPC support unit and external consulting. At

the moment only a limited range of external consulting is provided by few local energy

agencies and sometimes by ESCOs, slowing down the market development and legally

jeopardising some EPC projects and their economic efficiency respectively. Obligatory energy

bookkeeping in the public bodies’ buildings at the national and local level is implemented

very slowly resulting in missing specific indicators for EPC public procurement, including life

13

http://www.european-energy-service-

initiative.net/fileadmin/user_upload/bea/Documents/WP6_D6_4_EU_Position_Paper_JSI_Slovenia_final.pdf 14

Framework conditions for Energy Performance Contracting, National Report Slovenia,

http://www.european-energy-service-initiative.net/fileadmin/user_upload/bea/Documents/Country_Reports_EESI/CountryReport_EESI_WP2_Slovenia.pdf

http://www.european-energy-service-initiative.net/fileadmin/user_upload/bea/Documents/WP6_D6_4_EU_Position_Paper_JSI_Slovenia_final.pdf




14



cycle cost evaluation, and for M&V of EPC projects performed, in terms of energy savings

achieved and cost-effectiveness of services provided.

5.2 Structural barriers

Removal of the following structural barriers is of key importance:

no EPC implementing mechanism set. Active role of government/relevant ministries

is absolutely necessary as the EPC market is not self-regulating and functioning in

needed and planned range.

no EPC projects pipeline in the public sector. Systematic preparation, financing and

implementation of the EPC projects in the public sector should be enabled and

professional team(s) established for preparation of EPC tenders, evaluation of bids,

supervision of implementation and M&V of results in order to reach national.

no design of calls for subsidies for cost effective deep renovation of public buildings

introducing the EPC. Cohesion funding should be used for building envelope in

obligatory combination with EPC funding, multiplying support effect.

no supportive environment for EPC in the residential sector. Subsidies to be provided

by the development bank in collaboration with local banks.

no analysis of optimal EPC financing mechanism (for example establishment of

revolving or guarantee fund) and non-educated financing institutions. Potential

national EPC financing institutions are Eko fund and SID bank (development bank).

no support to EPC project facilitators. Education and operation of competent and

neutral EPC projects developers should be supported to speed up projects

preparation and underpin EPC market development.

5.3 Financial barriers

During the period 2009-2012 third party debt financed EPC projects were competing for the

energy efficiency market with in-house energy efficiency projects heavily subsidised in the

framework of the EU cohesion financing program. The result was poor: even few EPC

projects implemented and assets and liabilities placed on ESCOs balance sheets significantly

limited ESCOs creditworthiness. One ESCO established special purpose vehicle (SPV) in order

to facilitate off-balance sheet financing of new projects but this approach has not been

recognised as efficient15. Some ESCOs received very limited financial support of a larger

parent company.

15

On the contrary, the SPV is regularly used for ESC combined heat and power projects.

15



The financing situation partially changed with the introduction of energy efficiency saving

obligation scheme fully operational since 2012 which provided subsidy financing for the EPC

projects. A result of this measure was significant increase of range of implemented EPC

projects, in terms of number (more than 15 projects/year) and investment volume (more

than €3 million/year). The problem is future change of financing of the energy efficiency

saving scheme out from supplement to energy price to energy distributors and retail energy

sales companies own financing; it is estimated that this change will slow down recent

development of the EPC market.

Due to financial crisis in Slovenia, identified by ESCOs as main driver of the EPC business,

Figure 3, local financing institutions (LFIs) have become even more rigid about the potential

risks of EPC projects. Establishment of risk-sharing facility, providing partial risk or partial

credit guarantee to absorb some EPC project risks and facilitating involvement of LFIs in EPC

financing therefore should be considered. A lack of access to funds at LFIs and constantly

increasing demand for EPC debt financing indicate a need for introduction of EPC dedicated

credit line by a public entity (such as Eco fund), in order to provide low-interest loans, even

for smaller projects.

16



6 Success factors

An overview of the most important success factors that the Transparense survey EPC ESCOs

indicated is shown in Figure 3. It is obvious that economy related drivers are the main ones

and surprisingly the availability of affordable finance is considered irrelevant.

Figure 3 Main drivers of the EPC business in Slovenia

Source: Transparense Survey, JSI 2013 (n=3)

6.1 Successful regulatory models

The on-going energy efficiency saving scheme system enabled a significant EPC break-

through in the period 2012-2013 establishing a stable financing source (subsidy) accessible

to all ESCOs. Despite the fact that the scheme will undergo a major revision probably limiting

availability of financing as obligated parties should have to provide own financial sources for

the operation of scheme, a solid base for further EPC market development has been

established: energy distributors and retail energy sales companies through implementation

of the scheme realised the potential of the EPC market, gained knowledge on the EPC and

started to intensively develop own EPC projects portfolio.

0

1

2

3

4

Num. of EPC ESCOs

17



6.2 Successful structural models

Local energy agencies started to play an important role of the EPC-Project Facilitators taking

overall or partial responsibility for successful realisation of EPC-project activities at regional

level including:

project/measures identification,

initial energy audits with estimates of energy saving potentials (evaluation of energy

consumption and cost baseline, economic efficient savings potential),

determination of targets (listing the measures to be taken into account, gross volume

of necessary investment means and gross volume of the reduction of energy

consumption and costs),

design of EPC-procedures including tendering documents, EPC-contract, M&V

protocol,

putting out call for proposals, selection of bidders,

monitoring of project implementation,

measurement & verification of project results,

mediation between customer and ESCO in case of disputes.

Their activities resulted in increased number and improved quality of EPC projects.

6.3 .Successful financing models

Investment subsidies are still needed for EPC buildings deep renovation projects. The EESI

“EPC plus” model which extends the service of the ESCO to comprehensive structural

measures on the building envelope like insulation or window replacement was recognised by

national cohesion funding programmers as an highly efficient tool to multiply gains (energy

savings up to 50%) in the next financing perspective 2014-2016. These services are going to

be a part of the EPC projects due contractual arrangements containing special requirement

on financing: the client will gain a subsidy only in case the EPC model is going to be used for

buildings with high needs for renovation.

18



References

Jozef Stefan Institute. 2010: Framework conditions for Energy Performance Contracting,

National Report Slovenia, EESI


initiative.net/fileadmin/user_upload/bea/Documents/Country_Reports_EESI/CountryReport

_EESI_WP2_Slovenia.pdf

Jozef Stefan Institute. 2012: Aggregated European Position Paper,


initiative.net/fileadmin/user_upload/bea/Documents/WP6_D6_4_EU_Position_Paper_JSI_Sl

ovenia_final.pdf, EESI

Jozef Stefan Institute. 2013a: Data base of energy efficiency saving obligation scheme -

PETROL

Jozef Stefan Institute. 2013b: Operational program for Green House Gases abatement till the

year 2020 and glimpse on 2030

JRC. 2012: Energy Service Companies Market in Europe, Status Report 2012 (to be published)

Ministry of Economy. 2011: Second National Energy Efficiency Action plan 2011-2016,

http://www.buildup.eu/publications/20831







http://www.buildup.eu/publications/20831

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