The Private Sector Role in the Growing Demand for Energy Efficiency Solutions

Eng. Khalid Al-Dawood, Managing Director, Energy Efficiency Era Dr. Fahad A. Al-Sulaiman, Director, Center of Renewable Energy and Center of Energy Efficiency, KFUPM

Energy Efficiency

What is needed?

Agenda

• Why Energy Efficiency ?

• How to Approach Energy Efficiency ?

• Current Status and Plans for Energy Efficiency

• Main Barriers and public-private partnership (PPP’s) Business Models

• What is Next and How to Get there ?

International Energy Efficiency Scorecard 2016 - ACEEE KSA is by-far the least energy efficient country among top 23 energy consuming countries

Demand Side More Efficient Use Conservation & Management

Supply Side More Efficient and Cleaner Supply

Demand Supply Management

Metering & Analysis

More Efficient/Cleaner supplies (take capital & time)

Current technologies allow us to target 30% savings

T & D

How to Approach Energy Efficiency ?

Energy Efficiency business is full of value-add opportunities

SAUDI Energy Efficiency Program (SEEP) • A national program to rationalize and raise the efficiency of energy

consumption in coordination with 30 government entities and many government institutions and enterprises and the private sector.

Domestic consumption in

the Saudi

About 38% of the total Saudi

production of petroleum

products and gas are consumed

locally.

By 2030

It expects to achieve a reduction by the

application of current and future savings measures approximately (1.5) million

barrels of oil equivalent per day in 2030

SEEC framework limits its scope to Demand Side Only, No price reforms authority and consensus-based

Current Status and Plans? • SEEC started platform programs for new appliance, standards for Cars & AC

units, and insulation codes for new buildings.

• SEEC established its governance, EE Permits policies &regulations

• SIDF & SEEC, have announced the development of special funding facilities

• SEC launched the initiative of smart grids and smart meters

• Industry, Transportation, and buildings, is targeted sector by SEEC

However, planning, financing and implementing of these improvements require

extensive government and private sector capacity to coordinate, develop and

implement

150+ Engineers : makes it Engineering Loaded programs

The Main Barriers to Energy Efficiency

• Benefits and stakeholders of EE are small and dispersed

• Owners rarely make EE initiatives a priority, unless mandated

• Policy, Regulations and plans do not provide clear market trend (incentives) for private sector to invest with confidence on return

• Investments and Returns are not aggregated to generate attractive returns for institutional investors.

• Financial markets lack data regarding EE retrofit risks & pay-back

• Projects complexity & High transaction cost is a challenge

• Private Sector capability; Labor market is not aware or skilled

• Limited Institutional capacity to develop EE products/solutions and support entrepreneurs

Technology Performance Prices Policy Market Structure Information Energy Use Culture

Individual Values Decision Structure Finance Incentive Structures

Addressing Financing challenges is far more difficult and complex than Planning and developing Engineering solutions

IEA Policy Pathway: Joint Public-Private Approaches for Energy Efficiency Finance

PPP: Public-Private Partnership

Model of Public Private Partnership? Government Buildings PPP Model that enable government to accurately measure, budget and manage the total cost of ownership of a buildings with guarantees from the private sector. This results in: Cost effective/efficient capital market access to address new and existing property needs Greater governance, transparency and discipline of spending Timely construction of building projects Innovative building designs and operational strategies Continuous improvement in life safety, building operations & EE

Public Sector identifies new or updated facilities need

Procurement & Selection Process

Private Sector consortium designs, constructs and operates facilities

(Developer, General Contractors, Facility Manager)

Models of PPP - Germany & UK Schemes

Germany Building Retrofit Public Funding Program (Year 2010) • For every 1 euro of public funds on EE construction and

refurbishment, federal government received 5 euro tax revenue from companies and employees.

• 340,000 jobs created in the sector • 1.8b euro saved in welfare (un-employment) payments UK Green Deal Programme (Year 2010) • Domestic building responsible for 40% of its final energy use.

Over 75% of energy used in homes is for space and water heating

• Improve energy efficiency in households and businesses at no up front costs, paying back through future savings in energy bills

• Retrofit 23m house to acceptable standards of energy efficiency, or “one building per minute to 2050” (DECC 2010)

Lack of human capital infrastructure

Lack of skills/trained personnel or institutions To support project financing; To prepare feasibility studies and business plans, To assess, measure and validate To implement Solutions To operate and maintain the technology To promote, increase awareness and change-behaviors Lack of service infrastructure for implementation, logistics and maintenance of solutions and the technology; Lack of institutional infrastructure to convert vendors energy efficiency solutions and renewable applications (technically proven) into commercial businesses at the local community level

Energy Efficiency in Buildings: Application Areas

Lighting Control and Regulation

Control of Heating,

Ventilation, Cooling

Blinds and Shutter Control

Security and Monitoring

Energy and Load

Management

Visualization and Operation

Remote Control / Maintenance

In general, building energy consumption is higher in industrialized countries. Thus, development has an important effect on energy demand from the building sector, implying that building efficiency becomes more significant as countries become more prosperous. The importance of energy efficiency in building sector is especially significant in developing countries, owing to rapid new construction with opportunities to employ efficient materials and best practices.

What is Next? – Partnership

Government/SEEC have at their disposal a number of policy levers which, in consultation with Private Sector (PPP), can develop/guide the transition, providing

consistency & stability for private sector decision making and investment, adopting more business oriented approaches.

•Codes, technical and product standards •Energy Efficiency and mandates •Fiscal/tax incentives •Financing that suit local conditions •Cluster/synergize scopes/projects & design best match business models

These measures typically include:

The local entrepreneurs should be assisted to develop with training and advisory services in the areas of business delivery models, quality control, marketing,

installation, maintenance, and after-sale services.

It is important to establish the infrastructure within local institutions that can assist in creating and nurturing viable energy efficiency and energy renewables enterprises

to deliver reliable and affordable solutions.

Proposed SEEC framework to PPP’s Consider increasing the role and participation of private into current design of Schemes and Programs The disadvantages of adopting a Utility or Semi-government (energy intensive industry) based (or biased by) Energy Efficiency schemes need to be balanced with adopting other possible PPP models Redefine SEEC Energy Efficiency charter/framework to include the development of SME and EE Private Sector. Consider PPP for “hanging fruits” projects thru implementing:- • Proven business models (Super-Esco’s) for specific EE applications (Government’s

Buildings, Mosques, Hospitals, Schools,…)

• Proven financing solutions and platforms (PACE, Social Responsibilities /voluntary Funds, Suppliers Pay,..etc)

Areas of PPP and Building Capabilities

Priorities Solutions and Targeted Technologies • Areas of highest capital optimization (Reek Load shifting/shaving) Energy Storage, TOU, Hybrid Supply • Areas of highest waste (T&D, Flue gases, Non occupied cooling…) Mirco-grids, Heat recovery Co-gen, Zone cooling • Areas of highest consumption (A/C, Petrochemicals, Cement,… Hybrid cooling, Buildings MS, high Efficiency Equipment, Variable Speed Pumps, Energy MS

Private Sector proactive roles /Road map • Build associations and alignment and synergy within the sector • Proactively participate in developing/proposing partnership models in close

coordination with SEEC and key government and semi-government stakeholders ;

Covering all sectors (Utility, Heavy Industry), Buildings and Transportation Establishing Priorities for areas of capabilities buildings Maximizing support from Relevant institutions (Education, Funding,..), and Actively engaging Community • Identify Private Sector Roles, Capability and scope for addressing key barriers

and challenges; Financing Human Capital transitioning

CEEE Focus Areas The center will has the following several foci, including but not limited to:

• Energy Efficiency Education, Training and Short Courses (EETC);

• Energy Efficiency Assessments Program (EEAP);

• Energy Efficiency Standards & Policy Development (EESPD); and

• Energy Efficiency Applied Research Projects (EEARP).

Center of Research Excellence in Renewable Energy

Research Clusters

Applied Research Engineering & Services Cluster

PV Module Development &

Assessment

Grid connection + Energy Mix

Solar buildings

Feasibility Studies

&

Energy Policy

R & D Cluster

Innovative Solar Thermal Systems

PV for Harsh Weather

Conditions

Energy Storage

Solar Cooling

&

Desalination

• is an Energy Service Company

founded in 2015, by a team of experienced engineers in the field of energy efficiency.

• We are geared to improve energy consumptions of large buildings, schools, hospitals, industrial plants, and more.

• We are also geared to provide innovative solar and energy storage solutions for special applications.

• We believe that Energy Efficiency is the single most important future source of energy, and the most important response to Climate Change.

• Our aim is to achieve significant reduction in the client’s energy consumption, without compromising performance.

• Experts will work with you on

simple goal “ Save Energy, Boost profits, and Cut carbon emissions”

• Our solution would comprise of one or more of the following core strategies, using our proven methodologies of sustainable energy efficiency : -

1- Buildings Energy Surveys or Audits 2- Industrial Energy Surveys or Audits Build 3- Energy Efficiency Value Engineering Design 4- Real Time Energy Monitoring System 5- Green Solutions & Energy Savers Products 6- Special Applications of Solar Storage 7- Special Applications of Battery Storage 8- Education and Behavior Change Programs

Thank You!