Transforming the ESCO market in Thailand Asian
Description: Transforming the ESCO market in Thailand Asian Clean Energy Forum, Manila, June 17 2015 Introduction ECN Policy Studies Energy research Centre of the Netherlands since 1955 Over 500 staff in seven research areas 60 staff in unit Policy
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slide1. Transforming the ESCO market in Thailand
Asian Clean Energy Forum, Manila, June 17 2015<br>
slide2. Introduction ECN Policy Studies
Energy research Centre of the Netherlands since 1955
Over 500 staff in seven research areas
60 staff in unit Policy Studies
Main think tank for Dutch government on energy and climate.
Global Sustainability group
Within ECN Policy Studies 15 staff work on issues of ‘global sustainability’ with a focus on four key themes:
Clients include: European Commission, UNFCCC, UNEP, UNDP, CDKN, DFID, GIZ, BMU, WB and the IPCC
Experience working in: Indonesia, Kenya, Ghana, South Africa, Argentina, Brazil, Mexico, Kuwait, etc.<br>
slide3. Introduction MitigationMomentum
Encourage learning on Nationally Approproate Mitigation Action (NAMA) development, and assist selected countries with developing a NAMA proposal ready for finance
We are proud to have Thailand participate in the second phase of the MitigationMomentum project
Project output and collaboration
Four NAMA Status Reports
Discussion papers on finance, MRV, and ODA
Assistance on NAMA development
Five country NAMA proposals
Various case specific policy briefs
Member ENC think tank; participation international dialogues and workshops<br>
slide4. Introduction ECN work together with the GIZ TGP-EEDP program (2012-2015) to develop a NAMA proposal:
Improving Energy Efficiency through stimulation of the Thai ESCO market
Other partners & stakeholders:
Ministry of Natural Resources and Environment (ONEP)
Department of Alternative Energy Development & Eff. (DEDE)
Thai Credit Guarantee Corporation (TCG) – 95% owned by Ministry of Finance
Thai ESCO Association (mainly represents smaller ESCOs)
ESCOs, commercial banks, energy end-users<br>
slide5. Energy Efficiency planning in Thailand 1992 Energy Conservation Promotion (ENCON) Act (and Program)
2010 Energy Efficiency Development Plan (EEDP): 2030 targets
Final energy consumption forecast to grow at approx. 4% per year over next 20 years
Energy Efficiency Action Plan (EEAP): extended targets to 2036<br>
slide6. Supporting measures ENCON Fund: financial support for ENCON program
Collects revenue from tax of THB 0.07 (USD 0.002) per litre on petroleum products. Capital = approx. USD 200m annually.
Supported by 3 major financial programs which ENCON fund provides capital to:
Energy Efficiency Revolving Fund (EERF) (2003-2011): stimulate EE investment in large-scale energy consuming industrial sectors. > THB 5 billion (USD 150m) over three 3-year terms.
Tax incentives (2006-present): for EE and RE projects.
Energy Service Companies (ESCO) Fund (2008-present): invests in EE and RE projects. THB 500m (USD 15m) in each phase (now announced phase 4)<br>
slide7. EEDP and ESCOs Key strategy to achieve EE ambitions (strategy 5 in the EEDP):
“The use of professionals and Energy Services Companies (ESCO) as an important tool to provide consultancy and to implement energy conservation measures in which the use of more advanced technology is involved”.
ESCOs are “companies providing energy services to final energy users, including, but not necessarily, the supply and installation of energy‐efficient equipment, building refurbishment, maintenance and operation, facility management and the supply of energy (including heat), accepting some degree of financial risk in doing so” (De Boer, 2012).<br>
slide8. ESCOs and Energy Performance Contracts (EPCs) ESCO Guaranteed savings
ESCO guarantees certain level of savings
End-user finances EE project
Currently 98.8% of ESCO volume in Thailand
Not feasible for many SME end-users ESCO Shared savings
ESCO and end-user share the savings
ESCO pays back loan with savings
Currently 1.2% of ESCO volume in Thailand
Requires financially strong and healthy ESCOs Source: IFC (2011) and GIZ (2013)<br>
slide9. NAMA objective Overarching goal to increase private sector investment in energy efficiency in Thailand, to realize its savings potential, and support the government in its commitment to energy efficiency by 2020.
Transform the ESCO market from a service based business model to EPCs – in particular Shared Savings
i.e. towards a market where EPCs are commonplace and the ESCO is able to assume business and/or financial risk<br>
slide10. Background analysis Identify barriers: Wuppertal Institute study and stakeholder consultations
Identify measures to overcome specific barriers
Analyse potential impact of these measures
ESCO market experts have been hired to provide input on:
Thai ESCO market potential and potential impact of the NAMA (energy savings, mitigation potential)
Lessons learned from international ESCO markets that could be applied to the Thai context<br>
slide11. Barriers to ESCO market growth in Thailand Source: Wuppertal (2014) and stakeholder consultations<br>
slide12. NAMA activities and outputs (financial) Loan Guarantee: to overcome barrier of lack of access to capital for EE projects – collaboration with Thai Credit Guarantee Corporation (TCG) – already offer several guarantee products to SMEs in Thailand
Grant scheme: for ESCOs to carry out feasibility studies to create a pipeline of projects (banks need projects to loan to)
Pilot projects: at least 2 best practice examples showing the process of application of the guarantee mechanism (to show track record)
Training for FIs: improve commercial banks understanding of EE investments and EPC so perceived risk is lower and loans increased<br>
slide13. NAMA activities and outputs (technical) Needs assessment and capacity building for government and commercial banks: on EPCs and ESCOs
Needs assessment and capacity building for ESCO Association and ESCOs: on Shared Savings business model, standardized EPContracting models and MRV
Capacity building and training on the Facilitation Approach: at least 5 pilot projects using EPCs.
Train ESCOs on different business models
Create transparency in what ESCOs can offer customers
Support clients lacking engineering skills, manpower and understanding of risk in identifying and selecting ESCOs
Technical assistance facility is established<br>
slide14. Potential Impact of the NAMA ESCO market potential:
Double turnover of Thai ESCO market from $150 million to $300 million in 2020
Energy savings and mitigation potential (rough, conservative estimates):
2000 - 3000 GWh per year in 2020
1,122,000 Mt CO2e - 1,683,000 Mt CO2e annually in 2020
Co-benefits:
Job creation, energy security<br>
slide15. Thank you!
ขอบคุณ!
Matthew Halstead
halstead@ecn.nl
ECN Policy Studies<br>
Asian Clean Energy Forum, Manila, June 17 2015<br>
slide2. Introduction ECN Policy Studies
Energy research Centre of the Netherlands since 1955
Over 500 staff in seven research areas
60 staff in unit Policy Studies
Main think tank for Dutch government on energy and climate.
Global Sustainability group
Within ECN Policy Studies 15 staff work on issues of ‘global sustainability’ with a focus on four key themes:
Clients include: European Commission, UNFCCC, UNEP, UNDP, CDKN, DFID, GIZ, BMU, WB and the IPCC
Experience working in: Indonesia, Kenya, Ghana, South Africa, Argentina, Brazil, Mexico, Kuwait, etc.<br>
slide3. Introduction MitigationMomentum
Encourage learning on Nationally Approproate Mitigation Action (NAMA) development, and assist selected countries with developing a NAMA proposal ready for finance
We are proud to have Thailand participate in the second phase of the MitigationMomentum project
Project output and collaboration
Four NAMA Status Reports
Discussion papers on finance, MRV, and ODA
Assistance on NAMA development
Five country NAMA proposals
Various case specific policy briefs
Member ENC think tank; participation international dialogues and workshops<br>
slide4. Introduction ECN work together with the GIZ TGP-EEDP program (2012-2015) to develop a NAMA proposal:
Improving Energy Efficiency through stimulation of the Thai ESCO market
Other partners & stakeholders:
Ministry of Natural Resources and Environment (ONEP)
Department of Alternative Energy Development & Eff. (DEDE)
Thai Credit Guarantee Corporation (TCG) – 95% owned by Ministry of Finance
Thai ESCO Association (mainly represents smaller ESCOs)
ESCOs, commercial banks, energy end-users<br>
slide5. Energy Efficiency planning in Thailand 1992 Energy Conservation Promotion (ENCON) Act (and Program)
2010 Energy Efficiency Development Plan (EEDP): 2030 targets
Final energy consumption forecast to grow at approx. 4% per year over next 20 years
Energy Efficiency Action Plan (EEAP): extended targets to 2036<br>
slide6. Supporting measures ENCON Fund: financial support for ENCON program
Collects revenue from tax of THB 0.07 (USD 0.002) per litre on petroleum products. Capital = approx. USD 200m annually.
Supported by 3 major financial programs which ENCON fund provides capital to:
Energy Efficiency Revolving Fund (EERF) (2003-2011): stimulate EE investment in large-scale energy consuming industrial sectors. > THB 5 billion (USD 150m) over three 3-year terms.
Tax incentives (2006-present): for EE and RE projects.
Energy Service Companies (ESCO) Fund (2008-present): invests in EE and RE projects. THB 500m (USD 15m) in each phase (now announced phase 4)<br>
slide7. EEDP and ESCOs Key strategy to achieve EE ambitions (strategy 5 in the EEDP):
“The use of professionals and Energy Services Companies (ESCO) as an important tool to provide consultancy and to implement energy conservation measures in which the use of more advanced technology is involved”.
ESCOs are “companies providing energy services to final energy users, including, but not necessarily, the supply and installation of energy‐efficient equipment, building refurbishment, maintenance and operation, facility management and the supply of energy (including heat), accepting some degree of financial risk in doing so” (De Boer, 2012).<br>
slide8. ESCOs and Energy Performance Contracts (EPCs) ESCO Guaranteed savings
ESCO guarantees certain level of savings
End-user finances EE project
Currently 98.8% of ESCO volume in Thailand
Not feasible for many SME end-users ESCO Shared savings
ESCO and end-user share the savings
ESCO pays back loan with savings
Currently 1.2% of ESCO volume in Thailand
Requires financially strong and healthy ESCOs Source: IFC (2011) and GIZ (2013)<br>
slide9. NAMA objective Overarching goal to increase private sector investment in energy efficiency in Thailand, to realize its savings potential, and support the government in its commitment to energy efficiency by 2020.
Transform the ESCO market from a service based business model to EPCs – in particular Shared Savings
i.e. towards a market where EPCs are commonplace and the ESCO is able to assume business and/or financial risk<br>
slide10. Background analysis Identify barriers: Wuppertal Institute study and stakeholder consultations
Identify measures to overcome specific barriers
Analyse potential impact of these measures
ESCO market experts have been hired to provide input on:
Thai ESCO market potential and potential impact of the NAMA (energy savings, mitigation potential)
Lessons learned from international ESCO markets that could be applied to the Thai context<br>
slide11. Barriers to ESCO market growth in Thailand Source: Wuppertal (2014) and stakeholder consultations<br>
slide12. NAMA activities and outputs (financial) Loan Guarantee: to overcome barrier of lack of access to capital for EE projects – collaboration with Thai Credit Guarantee Corporation (TCG) – already offer several guarantee products to SMEs in Thailand
Grant scheme: for ESCOs to carry out feasibility studies to create a pipeline of projects (banks need projects to loan to)
Pilot projects: at least 2 best practice examples showing the process of application of the guarantee mechanism (to show track record)
Training for FIs: improve commercial banks understanding of EE investments and EPC so perceived risk is lower and loans increased<br>
slide13. NAMA activities and outputs (technical) Needs assessment and capacity building for government and commercial banks: on EPCs and ESCOs
Needs assessment and capacity building for ESCO Association and ESCOs: on Shared Savings business model, standardized EPContracting models and MRV
Capacity building and training on the Facilitation Approach: at least 5 pilot projects using EPCs.
Train ESCOs on different business models
Create transparency in what ESCOs can offer customers
Support clients lacking engineering skills, manpower and understanding of risk in identifying and selecting ESCOs
Technical assistance facility is established<br>
slide14. Potential Impact of the NAMA ESCO market potential:
Double turnover of Thai ESCO market from $150 million to $300 million in 2020
Energy savings and mitigation potential (rough, conservative estimates):
2000 - 3000 GWh per year in 2020
1,122,000 Mt CO2e - 1,683,000 Mt CO2e annually in 2020
Co-benefits:
Job creation, energy security<br>
slide15. Thank you!
ขอบคุณ!
Matthew Halstead
halstead@ecn.nl
ECN Policy Studies<br>