ESCO in Italy

Energy Service Companies in Italy

An Energy Service Company (ESCO) is a company that offers integrated services and implements interventions aimed at energy saving and efficiency. The ESCO is committed to conserve energy or generate renewable energy for the customer. It does so from initial analysis of the feasibility and engineering design, through subsequent implementation, to management and maintenance. In the spirit of the pertinent legislation, unlike other "traditional" service companies, an ESCO is paid based on the energy savings actually achieved with the implemented project; it will make gains (or recover its investment) only if the savings are real.

Energy Service Companies in the Italian legislation

In Italy, the first definition of Energy Service Company (ESCo) was given in the Legislative Decree 115/2008 (Implementation of Directive 2006/32 / EC on end-use efficiency and energy services). This decree also introduced the concept of "Energy Performance Contracting" (EPC), a contractual arrangement between the beneficiary and the provider, concerning a measure of energy efficiency improvements, where payments for investments are paid upon demonstration of that measure.

The subsequent adoption of technical standard UNI CEI 11352: 2010 (Energy Management Companies providing energy services (ESCO) - General requirements and checklist for their assessment), provided the basis for the certification procedure for voluntary ESCOs. This standard describes the minimum requirements for energy efficiency services and capabilities (organizational, diagnostics, design, management, economic and financial) that an ESCO must possess in order to be certified. That standard has been replaced by UNI CEI 11352: 2014 version, which contains more stringent criteria for the verification and validation of the requirements necessary to achieve certification.

The status of ESCo is gradually moving from a voluntary system to a mandatory one. Legislative Decree 102/2014 requires, from July 19, 2016, ESCO statements in the form of energy audits for large companies and public buildings of the state and imposes Energy Efficiency Certificates (or white certificates). These certificates for buildings will have to be issued by organisations that, themselves are certified according to UNI CEI 11352: 2014, or that have in their staff an EGE (Expert in Energy Management) certified according to UNI CEI 1133. This will guarantee adequate energy performance for whoever uses the services of these organisations.

In addition, the Legislative Decree 102/2014 defines the minimum requirements to be included in energy performance contracts signed with the government (although the private sector are requested to set these requirements as well). Probably, this was added in response to criticism that, so far, hampered the proliferation of ESCOs.

The many types of contracts that may be entered into between an ESCO and a client, in line with the principles of transparency, can be quite challenging for the ESCO. Under the Energy Performance Contracts (EPC), an ESCO will redevelop a building and its indoor climate installations. Subsequently the ESCO and its client will cooperate to improve energy performance and achieve energy savings. The main feature is that the investments made for interventions will be recovered through the savings achieved.

Prerequisite for the application of an EPC is the knowledge of the real initial consumption of fuel and electricity in buildings covered by the contract. The annual fee that will be paid to the ESCO depends on the amount of energy savings compared to that reference situation.

Critical issues

Several problems plague the widespread use of contracts with ESCOs. A important issue is the required guarantee of the result for the client: the ESCO has to take the risk of achieving a specified level of energy savings produced by redevelopment, based on clear and transparent methodologies for calculating consumption before and after interventions. These methods, as well as indicators of reference, are not defined in a standard way by regulations however, thus it can become complicated for a company to estimate the actual savings that will be obtained with respect to the reference situation. The definition of a "baseline" that is clear and reliable over time is not easy and would require the simultaneous definition of criteria to be applied in the face of changes in the profiles of use (altered customer intentions), variability of seasonal climate (degree-days may not be a valid parameter to normalize consumption), limitations in the knowledge of the general public on how to use the building's climate control systems and the degree of awareness of building users with respect to the issues of energy efficiency.

It seems clear that the ESCO will protect its investment and interests in defining the contractual criteria. However, excessive contractual freedom granted to the ESCO in choosing the most efficient technology from an energy point of view may not be the most prudent choice for anyone who runs schools and other activities of public interest: the design of innovative technologies should always take into account the reliability of systems over time and the possibility of opening their maintenance to a larger number of people of varying levels of expertise in case of default of the ESCO during the contract period.

The preparation, development and implementation of contracts with guaranteed results requires, firstly, a strong political will in this direction and, secondly, must be based on extensive experience in managing these types of contracts. Certainly the latter kind of experience is not available yet at the level of a public administration.

The experience of the Municipality of Cesena

Both the Directive 2006/32 / EC and the more recent Directive 2012/27 / EU assign a major role to the Public Administration, who with their behaviour should serve as an example to citizens and businesses. It is the public authorities who are to develop a market for interventions toward energy efficiency, which can later be extended to all real estate.

The Municipality of Cesena focused on energy efficiency and technological innovation, not only to reduce the energy costs in their buildings, but also to reduce the general consumption of fossil fuels and promote renewable energy. The objective is to reduce the emission of pollutants and greenhouse gases, in the broader context of membership of the Covenant of Mayors. With this vision, in early 2011, the Company Energie per la Città SpA was formed. This company is under the direction and coordination of the City of Cesena, and it performs energy management services, facility management, energy oriented innovations and exploitation of renewable energy sources. In particular, energy management consists of a comprehensive and structural effort to achieve energy savings in order to identify and meet the needs (energy, environmental, economic) of the community.

'Energie per la Città SpA' engages in energy management on behalf of the Municipality of Cesena by conducting:

- Energy Services and activities aimed at energy saving;

- Monitoring of consumption of primary energy (automotive, electric power, natural gas and district heating);

- Promotion of energy efficiency;

- Analysis of the electricity and gas market and advice to the City.

The role of such a company (which is a de-facto ESCo whose services are available only to City Council), pertains to all public buildings, and concerns the management of the municipal heating systems, plumbing, electricity consumption and production of energy from renewable sources. In addition, the company carries out interventions pertaining to facilities, both in terms of maintenance, and in terms of designing energy efficiency measures. A case in point is the project “Caldaie in rete” (which may be translated as "boilers in network"), regarding the control and remote adjustment of heating systems. The new over-all system is aimed at the management and control of local heating systems in municipal buildings and it works with GSM connections. "Caldaie in rete" is created as part of a larger project that includes the installation of several new condensing boilers to replace obsolete systems and the upgrading of facilities, providing access to important energy benefits, efficiency and user comfort.

An example of the introduction of renewable energy sources is the Le scuole del sole ("Schools of the sun") project. This concerns the implementation of photovoltaic installations on the roofs of school buildings, through a process that involves programming, design, implementation, monitoring and disclosure. The installations are constantly monitored by a remote control system that allows the operational headquarters of ‘Energie per la Città SpA’ to monitor local energy production and local energy use, as well as the (mal)functioning of plants. On completion of the work, Municipality of Cesena and 'Energy for the City Inc' organized moments of energy education in schools to enhance the culture of renewable energy and energy conservation.

Conclusions

The service offered by an ESCO to a customer must be aimed at achieving improved energy efficiency of the building systems, in keeping with all the agreed performance criteria, which must be based on the basis of the data collected. The service should include the identification and implementation of actions and interventions, and the subsequent verification of the improvement achieved. One aspect to be reckoned with during the definition of an ESCO’s Energy Performance Contracts (EPC) is the use of replicable and transferable technologies: for example, if the ESCO were to fail, the client must be able to still use the building and the heating, cooling and other indoor climate control systems in it, or to pass over their management to another entity. In this context, adherence to the best practices already successfully implemented and tested elsewhere, will help to guarantee of the success of the contract.

Other important considerations are:

- given the age and the state of preservation of most of the public buildings, due priority should be given to interventions on the structure (perhaps in conjunction with seismic upgrading), coordinating these with interventions regarding energy that may be simpler and have a shorter "payback" time;

- any EPC, however well written, should protect the Public Authority (owner of the building) especially if it was not able to train or hire a competent professional itself, and leave it capable of contacting and switching among the ESCOs on the market;

- the progressive certification of ESCOs according to the criteria of the UNI CEI11352 could lead to a screening of the market players in the public and private sectors based on real skills.

It is hoped that the use of EPC contracts will spread, allowing all the actors involved (ESCO, public and private) to sharpen their technical and managerial skills. In fact, very often we forget the fundamental role of a building’s users in energy performance.