SEAP design and implementation in Croatia
Representatives of municipalities, regional authorities and energy agencies as well as financial institutions and energy companies from entire Croatia
Soon to become the most recent Member State to the European Union, Croatia has, since its application for membership, undergone an extensive development in the fields of energy and environment. And while plans are under way and goals have been set, they now need to be achieved.
Energy Performance Contracting (EPC) is strongly supported by the EU as a valuable tool towards achieving a higher energy performance, and sees it specifically relevant for the public sector.
The ManagEnergy initiative under the Intelligent Energy Europe Programme has taken up the challenge to make stakeholders, especially local authorities, aware of the potentials and how to address those in the form of 45 capacity building workshops around Europe in the period 2012-14. This article reflects one of the first capacity building workshops specifically dedicated to EPC, held in Koprivnica, Croatia, 26-27 March 2013.
Click here to view photos from the day
Croatia has a very active Covenant of Mayors (CoM) membership base. 44 local and regional authorities are currently signatories, of which 32 have submitted their Sustainable Energy Action Plans (SEAP) and are striving towards implementation. A number of cities have put quite some energy and time into preparing good SEAPs and are now struggling not to lose momentum needed for implementation to succeed. Certainly, financing is a key issue and potential threat where it cannot be secured.
The ManagEnergy (ME) capacity building workshops are supporting the process of SEAP design as well as implementation. Since the adoption of the Energy Efficiency Directive, the workshops have furthermore become a pillar of EU’s Campaign for the promotion of the Energy Performance Contracting (EPC) concept. The workshop held in the city of Koprivnica in Northern Croatia from 26-27 March, thus put a specific focus on EPC. While EPC projects are not per se a goal to be achieved, EPC is one valuable and important tool for the implementation of goals set within SEAPs. EPC is a tool for increasing energy performance by reducing consumption and emissions in buildings, for street lighting, as well as energy supply; its (contractual) guarantee of results being the core added value over energy efficiency upgrade through different concepts.
In Croatia, EPC development started in 2003 with initiative of the GEF and the World Bank. They helped establish the first ESCO in the country, a utility based company, subsidiary to Croatia’s national electricity company HEP. The market is in an early stage and HEP ESCO is still the only active ESCO on the market today. And while in the beginning the projects implemented were not ‘classical EPC’ because no guarantee was given on the savings to be achieved, the ground is prepared. In the course also framework conditions have gradually become more favourable, though there have been drawbacks in the process.
In 2010, a drop in activity in the core target group of the time - the public sector - was attributed to changes in procurement regulations. Shortly afterwards, the government made an initiative to promote the development through the foundation of a central agency (CEI) that is to coordinate major investments in energy efficiency and infrastructure, providing (financial) support for project preparation and audits, and coordinates tenders.
While the interest in a “no funds needed” type of approach like EPC is attractive to potential customers, there is still a mix of lack of knowledge and scepticism that needs to be overcome. The potential for its implementation exists, both in the public as well as industrial sector. In the former, a frequent need of building shell refurbishment and associated higher costs, however, can pose a threat to projects being implemented. The investment in the building shell is ranked high, sometimes higher than the energy efficiency, and the latter may not be easily separated from deep refurbishment. For ESCOs, however, as providers of energy efficiency upgrades for the building’s energy system, deep refurbishment will mostly not be viable.
A key issue is thus how to improve the framework conditions in favour of stimulating also deep renovation through EPC. One possibility could for be the establishment of a revolving fund where ESCOs could get favourable loans specifically to enable measures with longer pay-back periods like deep refurbishment.
As straightforward the principle concept of EPC may be, it also affords outside the box thinking if its potential is to be fully used. Proper project preparation is key to understanding what the real needs are, and to distinguish between energetically necessary and important measures to achieve goals, versus nice to have but economically not viable ones. Another key to success is to understand that a competition of ideas helps in bringing out the best of the know-how in an ESCO, where the challenge is not to implement merely prescribed measures, but to provide a systemic picture and concept for best and lasting results. In order to achieve this, it is important to understand the usefulness and the limitations of audits, and their role in tenders for EPC projects.
The following example from the Czech Republic shall help illustrate the point. The subject matter in this example was the energetic upgrade of a school.
1- source: SEVEn - the Energy Efficiency Centre
What can be seen is that the ESCO closely looked at the best options to achieve most with least, which, in the majority of cases should also be in the interest of the building owner. The figures suggest that a higher reduction of energy (cost) savings is achieved via the measures designed by the ESCO. Had simply the measures of the audit been implemented, higher costs for less reduction in energy likely would have been the result. This is not to say that energy audits are useless! However, it is clear that they do have limitations that need to be considered, e.g. that they may not provide a systemic picture, depending on who prepared it (mechanical focus, electrical focus). They specifically need to be treated with care in their investment cost and payback calculations, because here rather often only simplified assumptions to equipment are considered. Hence it is concluded that while audits are valuable for the preparatory phase, in gaining a snapshot on needs, they should not be the core content and mandatory catalogue of measures for EPC projects.
One prudent way forward to assure long term reduction of energy consumption and emission levels and increase understanding of real refurbishment needs is also to (continuously) measure and analyse the patterns of energy consumption before actually trying to manage it. This was also discussed and concluded at the workshop in Koprivnica where participants brought real data from potential EPC projects as a basis for more tangible discussions. The largest elementary school in Koprivnica, for example, has approx. 150,000 Euro of annual energy costs. Built in 1988, the building has a two shift use system and hence an excellent occupancy level. An unusually large part of costs are related to heat energy. It was concluded that a metering concept and monitoring project might even be a first ‘EPC light’ project, also because proper monitoring energy consumption in itself has shown to be able to help activate savings up to and even above 5%. On a wider country scale, an appropriate metering policy to ensure a widespread increase of understanding energy use patterns would be supportive.
A high level of understanding of EPC on the side of authorities is essential to prepare a more helpful ground for EPC projects to take off on the Croatian market. It would then help the existing potential to become a real market potential, attractive for companies to enter into the competition.
Hence, EPC process handling - technical assistance and support in quality project preparation is key. A key result of developments in other markets has been that an intermediary between potential customers and suppliers of EPC services is helpful to build trust and understanding on both sides. On the ground, with local authorities as a main target group, local and regional energy agencies are the obvious candidates for such a supporting role; given they have sufficient technical and financial know-how. On the other side, models for funds to support these kinds of services need to be considered. The current workshop in Koprivnica, co-organised by the local energy agency, and the lively and productive exchange among participants underlines the positive impact of such support. The momentum gained here with real projects should be picked up and taken further into structuring a service package to continue what has been started at the workshop. Within the region, 5 to 7 SEAPs are currently under preparation and form an excellent basis for pilot implementation.
In order to drive the movement, the agencies need to formulate needs to help implementation under given framework conditions, or to formulate how options such as a revolving fund structure can support them.
The author of this article is Alexandra Waldmann, who also served as a trainer at the CBW in Koprivnica, 26-27 March, 2013. Kind thanks to Nils Daugaard from EC Network for his reflections.
 As of March 2013
 Such type of revolving fund is currently operating in the Emilia Romagna region of Italy
Organised by: EC Network with City of Koprivnica
Event website: http://www.managenerg...
Name: Boris Kuharić
Telephone: +385 48 289 245