Post Compliance with the Energy Efficiency Directive How to Deliver Business Value ERM Webinar
What final requirements for compliance are in place across the EU Member States?
EED Introduction The Directive The Energy Efficiency Directive (EED) was passed as law 2012/27/EU on 25 October 2012 Article 8 specified that Member States introduce a regulatory requirement for large companies to complete energy audits on 4 year cycles, with the first deadline to be 5 December 2015 Minimum Requirements for the process of conducting energy audits which Member States were expected to transpose in to law were outlined in Annex VI of the Directive National transposition Countries have transposed the requirements with varying degrees of adherence to the Directive Transposition has progressed at different speeds across the EU; a significant number are still incomplete
Transposition Progress Fully Transposed with Regulatory Guidance Austria Cyprus Denmark Finland France Germany Hungary Ireland Italy Malta Netherlands Romania Slovakia Spain Sweden UK Partially Transposed/Subject to Amendment Belgium (Flanders) - to be amended Bulgaria - elections held in October 2015 Croatia Czech Republic - awaiting amended Ordinance Estonia Latvia Portugal Slovenia Not Transposed (as of 1 November 2015) Belgium (Walloon) Belgium ( Brussels) Greece - a revised law was expected to be considered during October 2015; Lithuania - draft Law on Energy Efficiency has not been adopted Luxembourg Poland
Scheme Extensions 5 December 2015 was the deadline for submissions across EU Member States, as determined by the 2012 Directive However, a number of countries are allowing both stated and discretionary extensions: i.e. regulators permitting late delivery of audits or notification of audits, either clearly or unclearly specified Selected confirmed extensions UK Deadline was not amended but enforcement was delayed to 29 Jan France Compliance deadline extended to 30 Jun no risk of incurring liability Poland The deadline will be 6 months after the law is transposed Spain Audit reports must be delivered by 14 November 2016 Sweden Notification with audit plan by 5 Dec; compliance due in 2016 Denmark The audit report must be submitted by 1 Mar 2016
Audit Notification Requirements Notification required No obligation to notify Notification not specified Belgium (Flanders) Austria Belgium Brussels Denmark Croatia Belgium Walloon Portugal Czech Republic Bulgaria Finland Germany Cyprus France Hungary Greece Italy Ireland Estonia Latvia Netherlands Slovakia Spain Sweden UK Lithuania Luxembourg Malta Poland Romania Slovenia 12 6 12
Penalties Maximum fines for EED non-compliance: selected EU Member States 200,000 180,000 180,000 Euros 160,000 140,000 120,000 100,000 80,000 60,000 40,000 20,000 0 20,000 65,000 Austria Croatia Czech Republic 125,000 71,000 50,000 45,000 40,000 32,000 30,000 5,000 Germany Hungary Ireland Italy Romania Slovakia Slovenia UK The totals above represent maximum fines of any individual type (e.g. for late compliance or false statements) some jurisdictions, such as the UK and Netherlands, are allowing for multiple fines to be levied on top of one another, allowing for the totals to be higher Most fines are expected to be corporate with relatively few jurisdictions opting for criminal sanctions In France and Poland fines will be calculated as a percentage of company turnover
Phase 2 (2015-2019) 5 December 2015 was the required deadline for the first 4 year cycle Phase 1 of the EED The phases are continuous and therefore we are now within Phase 2; this will have a deadline of 5 December 2019 Regulations may change at both the European level and the national level before the deadline for the next phase Regulation is shaping the infrastructure of energy efficiency at a national level The financial incentivisation to undertake ISO 50001 in Germany Review of energy and carbon reporting in the UK due during March budget
Strategic Energy Management Post ESOS / EED Getting business value from the EED audits
Post ESOS / EED What did we learn? Analysis revealed significant variability due to data quality and in some cases different occupancies and working hours (i.e., 24/7 versus 8AM- 5PM M-F) Potential Savings from 10-30% (or more) are possible with modest investment. Common themes Behavioral measures, Lighting and HVAC best practices. Benchmarking and deeper dives on laggards will result in higher savings and better ROI during pilot implementation.
Sample of EED/ESOS Audit Results More than just a compliance benefit: Large Audit Programme (Manufacturer of automobile parts): 34 site audits Average of 10 cost saving opportunities per site at an average total of 300K to 350K Saving represents 16% of the total energy consumed by the clients operations Average payback period of 3,5 years for package of opportunities Private Equity Audit Programme (Multisector): 24 site audits Total of 1,063,297 in annual cost savings identified for the portfolio Small Audit Programme (Paint Manufacturer): 2 site audits/company transport fleet Average of 118 000 saving opportunities per site/ 67 000 in vehicle savings Average payback of 5 years for package of opportunities/0.7 years payback for vehicle initiatives
Post ESOS / EED - Options The EED has moved energy efficiency from being an optional aspect of environmental management to a regulated business function. Obligated organisations in the EU now need to comply with country-specific regulations promulgated by EU (Energy Efficiency) Regulations 2014 (SI No. 426 of 2014) transposing Article 8 of Directive 2012/27/EU and in the UK the Energy Saving Opportunity Scheme (ESOS) What comes next? Compliance period = 4 years Option 1 Be the laggard and do nothing until 2019 and then Rinse and Repeat Option 2 Consider ISO50001 continuous improvement Option 3 Monetize the opportunities and capture the business value
Option 1: Do Nothing (Be the Laggard) Pros -(Perception that it) Costs Nothing Cons -Lost opportunity cost -Fall behind peers (Laggard) -Reduced business value -Lower property values -Lower occupancy rates -Lower rent -Lower occupant satisfaction -Higher energy costs and -Higher maintenance costs
Option 2: ISO 50001 Certification Pros -ESOS Compliance -Reduced Energy GHG -Increased cost savings -Increased knowledge and awareness -Improved operational efficiencies -Continuous Improvement -Future proofing Cons - Cost of development and certification - More difficult for large portfolios
Option 3: Monetize the Opportunities Pros -Reduced Op. cost -Leader among peers required -Increased business value -Increased property values -Increased occupancy rates -Higher rent -Higher occupant satisfaction -Lower maintenance costs Cons - Implementing EE programs is difficult - Some Capital Investment will be
Post ESOS / EED Plan 1. Validate portfolio performance and benchmark then answer the questions - did we audit the right properties? Should we audit more? Which properties do we need to do a deeper dive? 2. Validate low cost no cost measures available to audited properties and explore immediate deployment across the portfolio. 3. Commit to measurement and verification of results across the portfolio that provides a central point for validation and reporting. 4. Turn the energy consumption data measured into information as part of a centralized monitoring and targeting program to help drive additional savings through improved behaviors and better resource management. 5. Selectively implement pilot projects across the portfolio using the buying power of a multi-site program to move the needle build a reputation of demonstrated success.
Post EED Program Roll Out Assemble the team Validate Data Prepare RFQ for implementation of low cost/no cost Implement low cost /no cost opportunities Monitor performance demonstrate success Prioritize properties for deeper dive(s) to develop a clear business case Design Bid - Build Commission Monitor Performance
This isn t just about cost savings On December 12, 2015, 196 countries unanimously adopted the Paris Agreement. The agreed goal is to limit warming to well below 2 o C with an ambition of 1.5 o C But, we re not on track Energy efficiency will be needed as a key enabler of this goal 18
Many businesses have set voluntary targets Major businesses have engaged significantly around COP21: We Mean Business Coalition - 363 companies American Business Act on Climate Pledge - 154 companies Science Based Targets Initiative - 114 companies RE100 initiative - 53 companies Oil and Gas Climate Initiative 10 companies All of these companies have committed, variously, to internal carbon pricing, deep reduction targets, 100% renewable electricity purchases, all voluntarily All of these commitments will drive action on energy efficiency How is your company reacting to this responsibility agenda? 19
Trailing Questions Do you want to be a leader or a laggard (or somewhere in the middle)? Has EED/ESOS resulted in energy and resource efficiency becoming a mainstream business objective? What are your company s environmental/carbon performance targets? Has their been progress in meeting the targets, and what are the consequences of missing them? What contribution can energy/ resource efficiency make towards hitting these targets? 20
Participant Questions
About ERM ERM is one of the leading sustainability consultants worldwide, providing environmental, health, safety, risk and social consulting services We have 5000 employees globally in 40 countries Over the past five years we have worked for approximately 50% of the Global Fortune 500 Who to contact Charles Allison Partner ERM +441865384802 Charles.Allison@erm.com 22