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Energy Service Companies
At the heart of innovative financing models for efficiency
Energy service companies (ESCOs) deliver energy efficiency projects that are financed based on energy savings. Given the need to rapidly and significantly increase financing for energy efficiency, interest in ESCO business models is growing.
Duration of ESCO projects in Latvia is well diversified.
Less than 5 years 38%
5-10 years 12%
11-15 years 0%
More than 15 years 50%
Debt and equity financing are typically used for ESCOs in Latvia. Currently there is work to development refinancing mechanisms for EPC projects. The Latvian Baltic Energy Efficiency Facility (LABEEF) is expanding the financing options available for ESCOs. LABEEF is funded by public and private investors. One of the investors of the fund is the European Bank for Reconstruction and Development. At the moment commercial banks are not considering any special conditions and loans for EPC projects. ALTUM a state-owned development finance institution has introduced loans for ESCOs as well.
The Energy Development Conception for 2007-2013 is a policy-planning document that established Latvian state energy policy objectives and actions for long-term development. The central goal is to improve energy efficiency of district heating systems, buildings and energy production by incorporating renewable energy sources.
The Guidelines for Energy Sector Development 2007-2016 set implementation benchmarks to be reached in the field of energy efficiency:
Energy intensities of 0.35, 0.28 and 0.22 TOE/1000 EUR in 2010, 2015 and 2020 respectively
Reduction of the specific thermal energy consumption in buildings from 220-250 kWh/m2/per year to 150 kWh/m2/per year by 2020
Increased average efficiency level of boiler houses from 68% to 80%-90% by 2016, and reduced level of thermal energy losses in transmission and distribution networks from 17% to 14% by 2016.
The QualitEE survey has collected data surrounding the main drivers and barriers of business for ESCOs in Latvia. This is an excellent opportunity to compare the structural differences of ESCO markets to identify policies or mechanisms that account for such variance. Policies can then be built to complement existing drivers and overcome identified barriers.
Current barriers to the ESCO market in Latvia include:
Lack of long term coherent policy and excessively changing construction laws.
Insufficient technical support for municipalities and apartment owners for project preparation and implementation. An example of this is that project development, project documentation and administration costs are excluded from the eligible costs in case of financing via loans.
Insufficient number of professionally trained specialists (building managers, energy auditors, designers, construction workers) and lack of qualified workforce
Little awareness of buildings and apartment owners regarding the advantages related to the renovations of buildings which limits their interest in participation in retrofits of the residential sector.
Little awareness and little trust in EPC/ESCO model on the side of both, citizens and financial institutions.