Governments and the private sector have become increasingly aware of opportunities for significant savings through energy efficiency. Within Asean, there is about US$43 billion in potential savings available if member countries adopt a technology intense strategy to drive efficiency. Thailand alone could save more than $1.1 billion in the commercial and industrial sectors.
To achieve future growth targets and to develop the AEC in the next decades, member countries require significant increases in energy supply. Besides building more power stations, looking at untapped energy cost saving opportunities is critical to sustain Asean's growth. Properly constructed projects that include energy efficiency measures allow clients to carry no financial or operational risks, and to enjoy real savings from day one. With such compelling savings in prospect, why has energy efficiency not gained wider adoption?
Some gaps have emerged between well-intentioned policy targets and the commitment to enforce them. Government agencies that oversee energy efficiency policies need to strengthen their coordination to avoid confusion in the marketplace. The existence of a regulatory framework in itself is not enough. Ultimately, its effectiveness depends on how well the relevant government agencies enforce policies and standards as well as to whether there are any mechanisms in place to ensure strict compliance. On top of that, many countries have energy subsidies for existing power generation from fossil fuels. These distort the market and hide the true cost of energy production.
An overarching policy framework that combines mandatory and voluntary policies along with strengthened enforcement of energy efficiency policies is needed. Energy subsidies could be dismantled progressively, in parallel with educating consumers about energy efficiency. Funding mechanisms that help energy efficiency programmes through the initial capital-intensive years would also help to secure long-term cost savings.
In the meantime, the private sector should not sit on the sidelines, waiting for the government to take the initiative. As an industry, we have to enhance our communication. Companies in Asean may be unaware of the untapped savings and therefore not consider the issue important enough for the boardroom. We also need to train more people, develop proper accreditation and certification standards, and publish accurate information about energy efficiency product suppliers and Energy Services Companies (Escos).
Many energy efficiency projects involve large-scale retro-fitting and installation, resulting in high set-up costs and long payback periods. At the same time, many high energy-consuming corporations do not want to commit their own funds to these projects. Banks have implemented funding programmes for such ventures; sound collaboration with Escos would certainly increase their success. Nevertheless, small energy service companies find it difficult to convince banks of their creditworthiness.
To break those barriers, the industry should move towards an integrated value chain approach. Energy services companies should think outside of the box and offer their clients holistic and guaranteed solutions, rather than limiting proposals to an existing product offer.
There is potential everywhere. Companies can offer customised solutions to clients by exploring innovative financing options including "build, own and transfer" packages. Where local authorities and companies prefer not to own the energy efficiency assets, equipment leasing packages can be offered. Other solutions involve flexible public-private ownership structures.
Collaborating with other energy services companies is a way to overcome scarcity of expertise. With the right approach, there is room for everyone. Many service companies or corporations can provide a genuine turnkey solution for the period of payback required; outsourcing expertise is a solution in these cases.
To encourage more energy efficiency projects:
Service companies need to be able to provide guaranteed performances and net savings backed by performance bonds;
Contracts must be transparent with clear KPIs, genuine metering systems, and pre-agreed returns and sharing of benefits for over-performance;
Transferring the risk associated with the project enables all risks associated with capital expenditure, operating expenditure and plant performance, to be moved from the client to the services company; and
Flexibility to have the service company exit the agreement and transfer all assets to the client, as well as managing the project to accommodate client expansion or contraction during the term of the agreement.
With the AEC moving forward, energy savings can provide a vital role in ensuring growth, without adverse environmental impacts. We are entering a period of great opportunities and challenges.
How we manage our industry and commerce will determine the standard of living for millions of people in the region over the next 30 years.
When considering energy options it is timely to remember that the greenest and cheapest energy in the world is energy saved and not consumed.
Eric Graef is regional director for energy services at Cofely-ENGIE.