There is great potential for ESCOs in Ireland; however, a formal ESCO association to represent the market has yet to be established in Ireland. Dublin alone has over 20,000 commercial and public sector buildings, accounting for 27% of the city’s energy consumption. These buildings spend approximately €298 million annually on energy; a number of ESCOs are well placed to implement energy efficiency projects to reduce this energy spending ( GuarantEE 2017 ). Despite public sector potential, the majority of EPC projects in Ireland operate within the private sector where contracts are negotiated with an individual ESCO and not tendered on the open market.
Overall, the Irish ESCO market is slowly growing. Currently the majority of ESCOs operating in the Irish market are international companies, with small branches in Ireland. In 2014, the development of the Energy Efficiency Fund of EUR 70 million was created in conjunction between government and private investors. The Fund has attracted companies from the construction sector to engage with the EPC model. The addition of these construction firms to the ESCO market reinforces the trend of EPCs in Ireland being executed as a subsidiary of a larger business. The beneficial change is the increase in domestic engagement with the EPC model.
The main area of growth for ESCOs in the Irish market is within the lighting sector; this is a common trend for young ESCO markets that are less familiar with executing EPCs due to simpler contracts where savings are achieved by switching to LED lighting.
The National Energy Efficiency Action Plan
The current (4th) National Energy Efficiency Action Plan (NEEAP)
outlines measures to achieve the national 20% target for energy savings. The NEEAP puts particular focus on the public sector to achieve that target – establishing a separate target of 33% savings for the public sector alone.
National Energy Services Framework
In addition to the NEEAP, the National Energy Services Framework was created with support from the Sustainable Energy Authority of Ireland (SEAI), to facilitate the public sector energy savings. This framework develops investment-ready projects for financing entities such as the National Energy Efficiency Fund, and calls for further energy efficiency measures in the non-residential market, with an emphasis on utilising EPCs.
The Energy Efficiency Obligation Scheme
In response to the Energy Efficiency 2012, Article 7 directive, the Energy Efficiency Obligation Scheme (EEOS) was established. Under the EEOS, obligated parties are energy distributors and retail energy sales companies that have market sales in Ireland of greater than 600 GWh final sales. The EEOS imposes energy savings targets on these obligated parties. They can choose to achieve energy savings independently or through partnerships with service providers in the market. This obligation creates a strong opportunity for ESCO involvement.
Key drivers of ESCO projects in Ireland are similar to other energy efficiency projects in that they are driven by non-energy benefits (multiple benefits) such as; increased comfort, lowered costs and a reduction of maintenance requirements are cited as drivers of implementing energy-efficiency measures.
Within the public sector, the presence of a large building stock with significant energy cost saving potential poses an opportunity for the ESCO market to grow in Ireland.
Within the private sector, the high degree of cost-conscious business owners who are willing to outsource energy efficiency improvements presents another opportunity for the Irish ESCO market.
Overall, the barriers to the Irish ESCO market are in-line with global market barriers; lack of experienced ESCOs, mistrust in EPC contracts and projected savings, and difficulty aggregating and funding small projects, being among the top barriers to market growth.
A current trend in the private sector is for in-house staff to implement and manage energy conservation measures. An associated drawback is that in-house staff lack expertise or approval for any project besides those with a short pay-pack period.
An example of innovative EPC financing in Ireland is Urban Volt, a LED lighting firm (in this instance acting as the ESCO) who partnered with SUSI Partners, a specialist energy efficiency fund. EUR 30 million was made available in funding over a two-year period to Urban Volt to install energy efficiency lighting free of charge for small businesses, which is paid back through the savings achieved. Urban Volt was responsible for bundling these smaller projects to achieve sufficient investment volumes. SUSI Partners would then buy the projects, taking over the credit risk of the customer defaulting. This model frees up cash flow for the ESCO to develop new projects, reduces their credit risk and enables start-ups and smaller firms to access capital (Energy Efficiency Market Report, 2017).