Innovative business models in the

energy efficiency services market

Dr. Brian Motherway

© IEA 2017

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2000

4000

6000

8000

10000

2000 2015

TFC

(Mto

e)

Global energy demand reduction from energy efficiency

Efficiency measures since 2000 reduced global final energy consumption by 11%, equivalent to the total

consumption of the EU.

Efficiency

savings

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Efficiency in IEA’s member countries has flattened demand

Without efficiency gains energy demand in 2015 in IEA countries would have grown by 1% annually

surpassing the 2007 peak. Instead, energy demand is 1% below 2000 levels.

130

140

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2000 2002 2004 2006 2008 2010 2012 2014

To

tal F

ina

l C

on

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EJ)

Energydemandwithoutefficiency

Actual energydemand

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Energy efficiency is a growing investment opportunity

Investment in energy efficiency increased by 6% in 2015, led by growth in the buildings sector

53%

18%

29%

25%

13%

6%

10% 9%

9%

15%

13%

Building envelope

Heating, ventilation and

coolingAppliances

Lighting

Energy-intensive industry

Other industry

Light-duty vehicles

Freight and aviation

Buildings

Transport

Industry

USD 220 billion

Global investment in energy efficiency by sector, 2015

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The ESCO market is important for energy efficiency services

The global energy services market was USD 24 billion in 2015. China’s market is growing 7% per year,

US market doubled in 10 years, EU market had small growth

United States USD 6.3 billion

European Union USD 2.7 billion

China USD 13 billion

Other USD 1.9 billion

Global energy service company revenues by country/region, 2015

© IEA 2017

What is an ESCO?

• Energy Service Company – ESCO

• Outsourcing thinking about or investing in energy supply, management and

efficiency

• An actor with some combination of expertise, time, technology and funding

• Addressing market barriers to energy efficiency opportunities

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• Remote monitoring and management of energy in commercial and

industrial sites

• Often based on shared savings or performance contracting

• Becoming a common offering from energy suppliers

Outsourcing energy management

Renewable ESS Smart

Device Heat,

Cooler Pump Gas/Water

K-iEMS Server Data

Server

DDC / PLC

• Example: Korea Electric Power Corporation

- K-iEMS a branded, proprietary integrated energy

management solution

- Consolidates control and management of

equipment, including solar supply

- Claims 20% energy consumption reduction

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• Upgrade or technology projects focused on energy efficiency

• Energy performance contracting – payment linked to savings

• Range of performance links from small payment hold-back to long term

revenue model

• Can include complete outsourcing of energy services

Energy performance contracting

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• In many countries, utilities have legal obligations to meet energy savings

• These savings can be directly from customers, via third parties, or sometimes traded as ‘white certificates’

• Third party companies are emerging to acquire and aggregate savings projects for utilities

• Example: Effy, France

- Aggregates home efficiency upgrade projects to sell the ‘savings credits’ to utilities

- Brings the value of the energy savings credit into the transaction

- Also offers brokering services between householders and upgrade contractors

Supporting utilities to deliver energy savings

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• Using technology to create reliable, real time data

• Exploiting the value of energy efficiency through a range of channels

• Opportunity to increase accuracy and enable aggregation for energy efficiency to be paid for system adequacy

Monetising energy savings

• Example: OpenEE, California:

- Paid-for-performance arrangements allowing utilities procure energy efficiency as a resource

- Sends price signal based on grid benefit by tracking time and location dependent savings

- Uses various monetisation channels

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Thinking about energy as a service

London-based BBOXX delivers energy

systems to remote off-grid African

locations.

• The system is designed not to provide a

certain quantity of energy, but to deliver

the required services.

• The package includes super-efficient

lights, TV, radio and phone chargers

supplied by a solar panel with battery

storage.

• The system is charged on a monthly

service fee basis through mobile phone.

© IEA 2017

Discussion issues

• Redefining the utility

• From supply and demand to energy service

• New markets for a new commodity

• The disruptive potential of technology

• Winners and losers in change

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Some regulatory challenges

• Enabling innovation

• Managing new value streams

• The utility’s business model

• Paying for infrastructure

• Distributional issues

• Stranded assets