Energy efficiency and digitalisation
Energy efficiency is changing, with new digital technologies enabling greater control, optimisation and analytics
German businesses that promote digitally enabled efficiency solutions can benefit from public funding of up to 2 million euros. Funding is tied directly to energy savings achieved.
The promotion of energy efficiency services has a long history in Germany, an early adopter and promoter of energy services such as energy performance contracts (EPCs) delivered by energy service companies (ESCOs). Digitalisation is having an impact on the energy services market, much like other segments of the economy.
With the rapid growth of digital technologies, the German Government decided to design a programme to leverage digitalisation for the benefit of energy efficiency improvements, to encourage innovation and business development, as well as to determine the feasibility of various digital applications for energy efficiency.
Eligible companies propose energy services that generate energy savings for their clients. Funding is meant to cover costs for development of an innovative digitised energy service, whereby 75% of the funding is granted based on actual energy savings achieved based on meter readings (this is an increase of 25% from the previous programme period as the market is becoming more developed and with increasing acceptance of end-users).
Levels of funding depend on fuel type and end use, specifically:
Additional remuneration – at 2cts/kWh – is also possible for measures that enable grid flexibility and integration of distributed renewable energy sources. For example, if a supplier installs a smart meter gateway or other technology that sends usage information to the grid, the supplier is remunerated at 2 cts/kWh for any load reduction achieved through that information.
Companies receive funding for five years to roll-out their respective product/service. Both large companies and small and medium sized enterprises (SMEs) are eligible. SMEs are eligible for 10% additional funding. A wide range of companies have applied and received funding under the scheme, including start-ups, SMEs, to large, more established companies.
The total funding envelope during the first period (May 2016 to December 2018) encompassed EUR 62 million, which was spent in its entirety. Funding for the second period, which goes until end of 2020 has been increased to EUR 100 million. Maximum funding per project has been increased from €1 to €2 million. Flagship projects that strengthen the market for energy efficiency financing are also funded with up to € 200,000 at a funding rate of 80%.
The first and pilot phase of this programme was launched by the BMWi (Federal Ministry for Economic Affairs and Energy) in 2016 and was concluded in 2018. Based on its success, the BMWi has decided to extend the programme until 2022.
Examples of funded projects include those that provide individualised energy advice to consumers in real time, automatic "energy-saving assistants" or innovative building and heating technologies that integrate weather forecasts and leverage some form of artificial intelligence e.g. self-learning algorithms. Projects have been funded in a variety of settings, including offices and retail stores, hospitals, swimming pools, hotels, restaurants and industrial sites.
According to the government, the programme has helped to stimulate a ‘lively start-up culture’. Since 2016, BAFA (Germany’s Federal Office of Economics and Export Control), which administers the programme and related subsidies, has approved more than 50 pilot energy saving projects for the BMWi. The programme successfully supported a more widespread roll-out of smart meters, both in industry and households. The programme has been conceived with a high degree of flexibility, in terms of eligible companies projects and measures. This has allowed innovation to flourish and invited a broad range of stakeholders to consider and develop effective applications of smart meters.
On the other hand, this high degree of flexibility and corresponding range of funding applicants and proposed measures also added complexity to all stages of programme management. Both in the proposal assessment and funding disbursement stage, it was difficult to establish a routine evaluation process and a diverse range of expertise was required to evaluate the proven energy savings against different baselines. This has created higher administrative costs.
The market context has also proved challenging, given the low priority level of energy savings in both industry and households, and corresponding awareness. An added challenge are concerns with IT system/data security.
However, as the programme has evolved, there are valuable lessons to be learnt. Firstly is to connect the benefits of energy savings with other benefits and market them together with other potential services (in German ‘Mehrwertdienste’) that can be provided based on energy consumption data. In industry, predictive maintenance has been an important driver of the uptake of smart meters and security (break-ins etc.) in households. The process is also continuously being streamlined with the design of funding documents and requirements evolving. For example, based on dialogue with funding applicants and experience evaluating funding proposals in the first round, an evaluation matrix has been developed to standardise the evaluation process.
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