Competitive Procurement Of Energy Efficiency

Transcription

1 Competitive Procurement Of Energy Efficiency

2 Public Procurement of Energy Efficiency Services e-learning Course To learn more about this series or other WBI activities, visit us at:

3 Importance of the Public Sector Public Sector Represents 10 to 20% National GDP Public Procurement (In European Union) In 2008 Expenditures 1,500 Billion Euros Represents 10-20% of GDP. Public procurement in EU is 1,500 Billion.

4 Energy Use in the Public Sector Public Sector Publicly-Owned Institutions Subject to Public Procurement Rules and Regulations Federal/Municipal Buildings Universities/ Schools Hospitals/ Clinics Public Lighting Water Utilities Public Transportation Stations Community Centers Fire Stations Libraries Orphanages

5 Energy Use in the Public Sector Public Sector Largest Single Purchaser of Energy Large Cost Burden to Governments Energy Use in the Public Sector Very Inefficient Because of the Use of Efficiency Improvement Public Agency Old, Outdated Equipment Inadequate Maintenance Limited Budgets Lack of Knowledge and Awareness Managers Staff

6 Typical Public Sector Energy Uses Government Buildings Public Lighting Water Utilities Institutional Facilities Many options for improved energy efficiency

7 Why Has Energy Efficiency Activity Been so Limited? Restrictions on Public Financing Rigid Procurement Policies and Practices Limited Constrained Annual Budgets Barriers in Public Sector Energy Efficiency Improvement Lack of Discretionary Budgets Lack of Incentives to Staff Principal- Agent or Split-Incentive Lack of Issue Responsiveness to Price Signals

8 Energy Savings Performance Contracting? Energy Savings Performance Contracting Approach or (ESPC) Turn-key basis Implementing Energy Efficiency Projects Contracting mechanism on a turn-key basis.

9 What is Energy Savings Performance Contracting? Engineering Construction Design ESPC Services Installation Cost savings Commissioning Measurement and Verification

10 What is Energy Savings Performance Contracting? Operations and Maintenance Providing or Arranging Financing ESPC Optional Services Training Optional services - financing, operations and maintenance (O&M), training, etc.

11 What is Energy Savings Performance Contracting? ESPC Services Compensation by Client Based on Demonstrated Performance In Terms of Energy or Energy Cost Savings ESP Technical Risk Financial Risk Construction Risk Performance Risk Contracting Compensation mechanism based on demonstrated a turn-key basis. performance.

12 ESPC Business Models Shared Savings Energy Supply Contracting Business Models for ESPCs Guaranteed Savings

13 Most Common ESPC Business Models Shared Savings Financial Institution Loan Repayment from Portion of Savings Share ESP Project Development, Financing, and Implementation Payment Based on Savings Share Host Facility The two most commonly used models are Shared Savings and Guaranteed Savings.

14 Most Common ESPC Business Models Guaranteed Savings Financial Institution Arrange Financing Loan Repayment with Funds According to ESPC Host Facility Project Development, and Implementation Payment for Services According to ESPC Savings Guarantee ESP The two most commonly used models are Shared Savings and Guaranteed Savings.

15 Most Common ESPC Business Models Energy Supply Contracting (or) Chauffage ESP Operations and Maintenance of the Equipment Sells the Energy Output Customer Assumes Costs for All Equipment Upgrades Ownership In some European countries the Chauffage model predominates. The ESP takes over operations and maintenance of the equipment and sells the energy output.

16 How Can ESPCs Address Barriers? Key Public Sector Barrier High perceived risks from new technologies and mechanisms. How ESPCs Can Address the Barrier ESPCs include performance guarantees to assign many project risks away from the Public agency and financier to the ESP. Constrained annual budgets for capital upgrades. ESPCs often offer project financing, either through an ESP or a third party, with repayments derived from project savings. Small projects with high project development and transaction costs. ESPCs allow for multiple smaller public projects to be bundled, since there is common ownership, often with notional audit/baseline information, thus helping to address development/transaction costs.

17 Results from Selected Countries COUNTRY MARKET SIZE PROJECTS RESULTS UNITED STATES US$ 3.8 billion Energy savings ~ 30 trillion BTU - US$11.7 billion cost savings CANADA C$ 320 million 85-20% reduction in energy intensity -C$40 million cost savings GERMANY 200 million 2000 properties % reduction in energy costs million cost savings JAPAN 10 billion 50-12% reduction in energy intensity SOUTH KOREA 223 billion Won 1,400 N/A

18 The Request for Proposals Request for Proposal (RFP)

19 The Request for Proposals ESPC Request for Proposal (RFP) Selection of ESP Tender Solicitation Bidding Document The success of energy efficiency project depends on effectiveness of competitive procurement.

20 The Request for Proposals Defining Type of Procurement, Project Parameters and RFP Specifications Key Elements of RFP Standardizing the RFP Defining Certain Additional RFP Requirements

21 Type of Procurement Products Equipment Goods Construction Works Facility Renovation Cogeneration CHP ESPC Services Audits Project Design M&V O&M

22 Examples of Procurement Type Country Type of Procurement Tamil Nadu Germany India (Tamil Nadu) Goods and Services India (Gujarat) Works and Services Germany Works or Services Gujarat U.S. (NYPA) Services U.S. (FEMP) New Law/Procedures France France New PPP Law United States

23 Examples of Procurement Type Developed RFP Template World Bank Management Services Provision of Goods Works Services The World Bank Developed RFP template for Management Services, - includes provision of goods, works, and services and allows for performance-based remuneration.

24 Project Parameters Objectives Evaluation of Bids Project Parameters Basic Description Development of Proposals Performance Parameters

25 RFP Specifications Measurement and Verification Investment Grade Audits RFP Required Specification Procurement, Installation and Commissioning Engineering and Design

26 Standardizing the RFP Energy Services Coalition (ESC) Examples Federal Buildings Initiative (FBI) Federal Energy Management Program (FEMP)

27 Standardizing the RFP RFPs Standardized After Considerable Experience Caution Standardizing too Early Limits Flexibility or Innovation Need to Adapt to Local Conditions

28 Bid Evaluation Complexity of Evaluation Process Audit Maintenance Detailed Design M&V Stages of ESPC Projects Financing Commissioning Procurement and Installation Different skills and capabilities needed.

29 Bid Evaluation Complexity of Evaluation Process Key Issues Assuring fair and transparent comparison, given the variability of technical solutions and multiple financial parameters. Assuring that the public agency has sufficient technical skills to carry out a proper evaluation.

30 Evaluation Criteria Clear definition of evaluation criteria. Numerical scoring and weighting scheme. Request For Proposal (RFP) Independently conducted by members of Evaluation Committee.

31 Evaluation Criteria Natural Resources Canada, Office of Energy Efficiency Category Maximum Value Weighting Factor Financial Payback Period Technical Competency Implementation Plan Operations and Maintenance Plan Project Management Training Plan 100 Points 100 Points 100 Points 100 Points 100 Points 100 Points 25% 25% 20% 10% 10% 10%

32 Two-Stage Evaluation Stage 1 - Technical Evaluation ESP Experience Project Management Technical Proposal Stage 2 - Financial Evaluation % Savings to Agency Minimum Investment Access to Financing Determine Overall Best Value Generally use Net Present Value (NPV)

33 Building Capacity of Evaluation Committee Evaluation Committee Managers Staff Public Agency Limited Capacity Understand and Evaluate the Energy Efficiency Measures Bidders and the Related Merits, Risks, and Overall Viability

34 To learn more about this series or other WBI activities, visit us at: