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JASPERS Framework Contract

Development of an Investment Programme for Buildings Rehabilitation – Romania

PUBLIC BUILDINGS

An engine for growth and jobs: EU Funds for energy efficiencyInternational Conference

Budapest, 6 November 2013

Project implemented by

member of the Consortium

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Purpose and content of the presentation

Purpose: To present the key issues analysed and solutions identified for the design of a Scheme for EE in Public buildings (under the ERDF / Regional Operational Programme of Romania).

The proposed scheme follows the general concept of the Scheme elaborated for the Residential buildings. Therefore, this presentation focuses on the main differences and special features of the Scheme for EE in Public buildings.

This presentation is based on the JASPERS study. The proposals to be presented do not necessarily reflect the final decisions that are currently under reconsideration by the Ministry.

Content:

A. Key options for the design and issues to be addressed

B. Elaboration of solutions

C. Conclusions - Proposals

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A: Key options for the design of the Scheme and issues to be addressed

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Key options for the design of the scheme - 1

1.Energy Performance Contracting (EPC) vs traditional public financing of investments

The advantages of EPC are recognised, but there were no choice:

• ESCO market is at an “embryonic state”, in Romania; despite all efforts so far there is a number of strong barriers;

• Procurement officers are not ready to tender out EPC contracts.

Short-term launching of a scheme under the ERDF should be based on solutions applicable in practice i.e. public financing; possible involvement of ESCOs at later stage.

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Key options for the design of the scheme - 2

2. Scheme designed and applied at regional level (by LPAs) for various types of public buildings vs a set of nationwide schemes, each one addressing a different category of public buildings

• The scheme should follow the ownership structure; the majority of public buildings at local level are under the responsibility of the LPAs

• A regional scheme fits within a Regional Operational Programme; Complication: different types of buildings/energy systems to be accommodated under rather uniform rules of a Scheme.

• The existing structures (PIUs of the LPAs) can be used.

3. The Scheme supports exclusively EE measures that produce direct and measurable energy savings vs major renovation of energy systems combined with EE measures

• The second option was proposed (to improve also functionality, safety, lifetime prolongation and reliability)

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Key issues for the successful implementation

Implementation of a Scheme for EE in Public Buildings through the Local Public Authorities (LPAs) will have to address almost all key issues identified for the residential buildings:

•Lack of capacity of public institutions operating public buildings (with few possible exceptions e.g. large hospitals)

•Limited capacity of the PIUs – lack of TA

•Questionable quality of energy audits (EA) /Energy Performance Certificates (EPCs)

•Questionable quality of works- supervision

•Increase of investment costs during construction

•Lack of an effective monitoring and verification mechanism (local and central)

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B: Elaboration of solutions

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Approach for the analysis of the investments - 1

The problems for the analysis of the technical and cost-benefit analysis of the investments are mainly:

•Unlikely the residential blocks of flats, there is no “typical public building”, not even “typical hospital” to analyse;

•There is a general lack of statistics for public buildings in Romania.

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Approach for the analysis of the investments - 2

The Consultant, following a rather unsuccessful survey aiming at collecting data from LPAs,:

•critically analysed 10 application files with studies for implementation of large scale EE measures in hospitals (supported by the current ROP); hospitals are considered the most “favourable cases” (large energy saving potential and favourable cost/benefit indicators as they operate continuously);

•Analysed the virtual case of an administration public building operating about 8 hours/day, 5 days per week i.e. a building with “unfavourable” cost/benefit indicators

The comparative results from the “favourable” and “unfavourable” cases provided an assessment for almost the whole spectrum of public buildings.

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Cost-Benefit Analysis - 1

CBA analysis (financial and economic) was performed from the point of view of the State. It confirmed that:

•the investment is financially non-viable, while at the same time it is viable from the economic point of view for both the “favourable” and the “unfavourable” cases, therefore

•the Scheme is eligible for EC support.

Description

Unit Amount

FRR % -1,5 %FNPV Th.Euro -486ERR % 10,8%ENPV Th.Euro 482.1

Results – Favourable case (hospitals) [Assumption: 50% of the investment (excluding TA) is allocated to main EE measures]

Description Unit AmountFRR % -4,8 %FNPV Th.Euro -658,7ERR % 8,4%ENPV Th.Euro 255.7

Unfavourable case[Assumption: 60% of the investment (excluding TA) is allocated to main EE measures]

Risk analysis for the unfavourable case:•Probability of FNPV>0 is 0%•Probability of ENPV<0 is 13%

FNPV<0 ENPV<0 ENPV>0

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Cost-Benefit Analysis -2

Financial analysis was performed from the LPA’s point of view to identify the break-even point (level of LPA’s contribution to have no-loss no-profit). The analysis confirmed that:

•LPAs must have a quite significant contribution to the investment costs in all cases (otherwise they will get profit from the energy cost savings).

LPA co-financing level % 10 20 30 40 50 60 100

Total investment k€ 1000 1000 1000 1000 1000 1000 1000

Investment for the LPA k€ 100 200 300 400 500 600 1000

FNPV- Favourable case k€ 414 314 214 114 14 -86 -486

FNPV- Unfavourable case k€ 241.3 141.3 41.3 -58.7 -158.7 -258.7 -658.7

Financial NPV for the LPA for different co-financing levels

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Cost-Benefit Analysis

CBA analysis (financial and economic) was performed from the point of view of the State:

The CBA and the related sensitivity and risk analysis confirmed that:

•the investment is financially non-viable, while at the same time it is viable from the economic point of view for both the “favourable” and the “unfavourable” cases, therefore

•the Scheme is eligible for EC support.

Financial analysis was performed from the LPA’s point of view to identify the break-even point (level of LPA’s contribution to have no-loss no-profit). The analysis confirmed that:

•LPAs must have a quite significant contribution to the investment costs in all cases (otherwise they will get profit from the energy cost savings).

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C: Conclusions - Proposals

Conclusions – Proposals 1

Proposed key features:The scheme for EE in Public buildings, under ROP, runs in parallel with the scheme for the Residential buildings, utilising the same implementation structuresBeneficiaries of the Scheme: Local Public Authorities (LPAs); fully responsible for implementationManagement of investment project cycle: Project Implementation Units (PIUs) of the LPAs; maximum involvement of technical services of the institutionsApproval of Applications / Financing Agreements with LPAs: Regional Development AgenciesSystem of selection: “First Come, First Served” based on strict eligibility criteriaTechnical assistance/capacity building for PIUs (supported by consultants)Harmonised reporting, monitoring and verification scheme (supported by consultants)

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Proposed targeted public buildingsOwnership: buildings owned by and operating under the authority of LPAs

Categories of buildings (in order of priority):

1.Hospitals and health care institutions operating 24 hours per day, 7 days per week;

2.Buildings delivering social services on a non-stop basis;

3.Buildings offering health care and social services during working hours;

4.Nurseries, schools, universities and vocational training buildings, including campuses and dormitories;

5.Administration buildings providing services to citizens (therefore visited by many citizens);

6.other.

Conclusions – Proposals 2

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Proposed scope of interventions

A.EE interventions (that produce direct energy savings) in the building envelope and technical energy systems / major energy consuming equipment; Requirements for integrated solutions and minimum acceptable technical specifications

B.Renovation and safety improvement measures associated with EE improvement measures; “renovation” can be implemented only in systems where large scale EE measures are applied (to exclude fragmental application of maintenance works)

C.Energy Management measures; certain EM measures to be obligatory

D.Information dissemination and visibility

Thresholds in investment cost breakdown between the above categories have been proposed.

Conclusions – Proposals 3a

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Conclusions – Proposals 3b

Measure type % of budget (indicative)

A. Main EE interventions60% minimum (50% for hospitals or other buildings with complex energy systems including mechanical ventilation)

B. Associated renovation and safety improvement measures

35% maximum (45% for hospitals)

C. and D. Energy management and information dissemination measures

7% maximum

Technical assistance (audit, design, supervision)

7% (10% for hospitals or other buildings with complex energy systems including mechanical ventilation)

Proposed budget structure thresholds per project investment plan

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Other important proposed key requirements:Energy class before the investment D or lower; after the investment B or A (in exceptional justified cases class C)Minimum final energy savings: 35%; savings are calculated on the total energy consumption of the building incl. space heating, DHW, cooling, electricity); savings from “soft” energy management measures are not taken into accountAvailability of operation and maintenance servicesBuildings with special characteristics (architectural, historical, etc.) are excludedBuildings with structural problems or built before 1950 are excluded

Conclusions – Proposals 4

For info or further questions on this presentation, please contact:

George ChavdarovEnergy Engineer

g.chavdarov@eib.org

Tero MakelaSenior Engineer

t.makela@eib.org

www.jaspersnetwork.org

jaspersnetwork@eib.org

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