ByZAINI ABDUL WAHAB

Energy Management System Consultant

GROUP

14th DECEMBER 2015G Tower Hotel,Kuala Lumpur

ENERGY EFFICIENCY INDUSTRY: HOW GLOBAL BUSINESS SERVICES

VENDORS CAN PLAY A PART TO ENHANCE ITS CONTRIBUTION TO

THE ECONOMIC GROWTH

A Malaysian Energy Service Company (ESCO)

Performance Driven through investments in EE projects implementation since 2001

Strong domestic &regional presence

With PROVEN TRACK RECORDS, experienced & specialized in-house expertise

CNS Group

Investments through Energy Performance Contracting(EPC) investment model

Computer-Aided Energy Resource Management System(CERMS)

Total energy efficient technologies & solutions

Energy audit & energy performance measurement

Energy Management System Development, Implementation & Performance Monitoring based on ISO50001 Standard

Energy management training program identification, development & delivery for in-house capacity building

Registered Electrical Energy Manager Services: Expert guidance & compliance

Sustainable energy management policy studies & development of strategic implementation plan for national, state & organizational levels

ENGINEERING SOLUTIONS

Project Implementation

MANAGEMENT SOLUTIONS

Energy Management System Consultancy & Advisory

OUTLINEOverview of energy efficiency business potentials

Overview of energy service industry, funding options & business models to implement high impact energy efficiency projects with big scale investments

Case studies & key success factors to sustain performance in energy efficiency projects

Barriers & proposed counter to develop and grow energy service business to enhance economic growth

Conclusion and the way forward for energy service industry

OVERVIEW OF ENERGY EFFICIENCY

BUSINESS POTENTIALS IN MALAYSIA

AND REGIONAL MARKETS

• EE programs help manage energy risks - reducing exposure to the high costs of sourcing, transport & energy-intensive upstream products

Energy Exposure Beyond Electricity Price

GLOBAL EE POTENTIALS

EE potential used by sector in the New Policies Scenario

2/3 of the economic potential to improve EE remains untapped in the period to 2035

Source:

IEA

SEA: INVESTMENT POTENTIALS (US$MIL.)

The total market size = US$6.7 billion

Industrial = US$2.9 billion(44%)

Commercial = US$3.7 billion(56%)

source: www.reexasia.com

Biggest potentials in

the industrial sector

ESCO INDUSTRY SIZE ESTIMATES BY SELECTED COUNTRY

Source: Lawrence Berkeley National Laboratory , National Association of Energy Service Companies, USA September 2013

Building owners can see reduced operating costs, increased building values, greaterreturn on investment, and higher occupancy from new and retrofitted green buildings

Source:UNEP - GEO-5 for Business Impacts of a Changing Environment on the Corporate Sector

Companies may receive reputational benefits from achieving green building certifications . A 2011survey of U.S. adults- 64% would prefer to patronize a business whose facility is certified as green,while 48% indicated that green certification of a facility improves their image of a company.

University of Missouri researchers - consumers would be more willing to pay between 15 & 20% more for retail products from companies that support sustainable practices

UN Global Compact of 766 CEOs worldwide-93 % of CEOs saidsustainability issues will be a critical factor to the future success of theirbusiness

2012 Ernst & Young Survey – 66% of executives saw an increased amount ofsustainability-related inquiries from investors in the past year. 70% inquiries focused onenergy management and greenhouse gas emissions & more than ½ questions aboutsustainability reporting

THE CORPORATE TRENDS…

Survey on 250 CFOs in 14 countries by Deloitte - CFOs are increasingly aware the benefits sustainability can bring to the business. 2/3 respondents said they are involved in driving sustainability strategies .More than 50 % said their involvement in pushing sustainable practices has increased in the past year.

TOWARDS GREENER

BUSINESS PRACTICES &

MARKET DEMANDS

EE BUSINESS NEWS& POTENTIALS

THE PRACTICAL STRATEGY FOR EE IMPLEMENTATION

ALTERNATIVE ENERGY

SOURCES

High costs

ENERGY EFFICIENT

TECHNOLOGY SOLUTIONS

Medium-high costs

Require financial & investment risks assessments

SAVE THROUGH BEST PRACTICES & CULTURAL CHANGE – ENERGY

MANAGEMENT

Low-no costs

CLEARER POLICY &

SUPPPORT

MEASURES

REQUIRED FROM

THE GOVERNMENT

TO ENCOURAGE

MORE

INVESTMENTS IN EE

OVERVIEW OF ENERGY SERVICE

INDUSTRY AND BUSINESS

MODELS TO IMPLEMENT HIGH

IMPACT ENERGY EFFICIENCY

PROJECTS WITH BIG SCALE

INVESTMENTS

ENERGY EFFICIENCY VALUE CHAIN

WHERE ARE YOU OR WHERE DO YOU WISH TO ENTER?

WHAT IS ENERGY SERVICE?

SCOPES OF ENERGY SERVICE IN IMPLEMENTING EEPROJECTS

Built-in scopes:

Project funding & financing options

Engineering & economic feasibility studies

Project design, engineering & permitting

Project construction

Project commissioning

Operations, spare parts & maintenance

Performance measurements, verification & monitoring

Energy performance reporting

Value

added/additional

scopes

Consultancy &

Advisory

Regulatory

Compliance

Standards &

Ratings

WHAT IS AN ENERGY SERVICE COMPANY(ESCO)?

ESCOs must demonstrate the technical & managerial competencies to design & implement projects involving multiple technologies & energy efficiency solutions at building/industrial facilities

Develop, implement turnkey & comprehensive EE projects

ESCOs offer energy performance-based contracts

Returns of investments by ESCOs are from the actual energy savings achieved by the projects as the main element their business

No upfront costs/investments required by the facilities owner

ESCO ORGANIZATION WORKFORCE BY JOB CATEGORY

Source: Ernest Orlando Lawrence ,Berkeley National Laboratory,2010

JOBS CREATED IN EE SERVICES SECTOR:COMMERCIAL & INSTITUTIONAL

Source: Ernest Orlando Lawrence ,Berkeley National Laboratory,2010

JOBS CREATED IN ENERGY SERVICE INDUSTRY: INDUSTRIAL

Source: Ernest Orlando Lawrence ,Berkeley National Laboratory,2010

JOBS CREATED IN EE SERVICES SECTOR:RESIDENTIAL

Source: Ernest Orlando Lawrence ,Berkeley National Laboratory,2010

KEY CHALLENGES IN WORKFORCE FOR ESCO

Shortage of management -level applicants level applicants with experience in energy efficiency

Shortage of experienced energy efficiency engineers

Building & construction industry

• Limited awareness that the EESS is poised to expand significantly & their skills will be required be required

• Retirement is a growing concern

• Limited number of skilled trainers for EE

WHAT IS ENERGY PERFORMANCE CONTRACTING(EPC)?

“Energy Performance Contracting is when an ESCO is engaged to improvethe energy efficiency of a facility, with the guaranteed energy savingspaying for the capital investment required to implement improvements”

FUNDING OPTIONS FOR IMPLEMENTING BIG SCALE EE PROJECTS?

LOAN

CONVENTIONAL

PROCUREMENT

ENERGY

PERFORMANCE

CONTRACTING

Performance

Guarantee Model

GRANTS ENERGY PERFORMANCE CONTRACTING

Shared/Guaranteed Saving Model

PUBLIC PRIVATE PARTNERSHIPINTERNAL

EXTERNAL EXTERNAL & BY

THIRD PARTIES

ENERGY PERFORMANCE CONTRACTING

Special Purpose Vehicle

HYPOTHETICAL SCENARIO – ENERGY EFFICIENCY COSTS & SAVINGS

Source: Government Property Group ,Integrated Energy Efficiency Retrofits and

Energy Performance Contracting ,Australia,2011

TRADITIONAL VS. INTEGRATED ENERGY SERVICE MODEL IN IMPLEMENTING EE PROJECTS

Traditional Integrated Energy Services Model

Source: Government Property Group ,Integrated Energy Efficiency Retrofits

& Energy Performance Contracting ,Australia,2011

DRIVERS OF GROWTH

Federal stimulus funding Federal stimulus funding

State, local & (potentially) federal policy

Market demand for EE products/services due to products/services due to rising energy prices & influence of policy

LOW PRIORITY VS. CORE BUSINESS

FUNDING THROUGH

LOANS/DEBTS FOR EE

PROJECTS WILL IMPAIR “CREDIT

CAPACITY

BENEFITS ARE TOO SMALL TO

APPEAR ON TOP

MANAGEMENT’S RADAR SCREEN

NOT CONVINCED ON ACTUAL COST SAVINGS ACHIEVED

HOWEVER, EXPECT THESE BARRIERS…

STRATEGIC PLAN & SUCCESS

STORIES FROM STRATEGIC

ENERGY EFFICIENCY

PROGRAMS IMPLEMENTATION

ENERGY SAVINGS BY 2020 IN EU COUNTRIES:How to triple the impact of energy saving policies in Europe?

Source: A contributing study to Roadmap 2050: a practical guide to a prosperous, low-carbon Europe

IMPACTS OF EE POLICIES IN JAPAN

1,327

1,273

1,192

1,101 1,101

1,059 1,059

1,000978

951

1,036

1,013

1,013

985

1,049

1,091

1,051

1,0701,077

1,037

1,0441,021

1,059

1,036

1,038

1,050

1,131

1,142

1,345

1,405

1,467

1,566

1,573

1,438

900

1,000

1,100

1,200

1,300

1,400

1,500

1,600

1,700

'73

'75

'77

'79

'81

'83

'85

'87

'89

'91

'93

'95

'97

'99

'01

'03

'05

Fiscal Year

Pri

ma

ry e

ne

rgy

co

ns

um

pti

on

/ G

DP

Ton oil eq.

/ Billion yen

Source: METI/General Energy Statistics

10 years

Improvement by 30%

1st Oil Crisis

2nd Oil Crisis

10% improved for 20 years

Key areas of improvement Energy management Energy efficient equipment Efficient processes

technologies R&D

ENERGY CONSUMPTION PERFORMANCE WITH NATIONAL EE POLICYIMPLEMENTATION IN THAILAND

Through strong regulatory implementation framework, sustainable funding &

holistic approach for focused sectors

KEY SUCCESS FACTORS

Major elements to

be considered

EFFECTIVE EE GOVERNANCE-IEA

ENABLING

FRAMEWORK

INSTITUTIONAL

ARRANGEMENTS

Regulatory Framework

National EE Policy

Level & Strategic Plan

Sustainable funding

Dedicated, empowered &

accountable agency

Resource requirements

Roles of utilities

Stakeholders engagement

Private-public sector co-

operation

International assistance

COORDINATION

MECHANISM

Governmental

• Targets &

evaluation

mechanisms

In March 2015, President Obama signed an Executive

Order calling for federal agencies to reduce energy

use in federal buildings by 2.5 percent per year from a

2015 baseline, through 2025 with Detailed Guidelines

attached

EUROPEAN UNION ISSUED:

Energy Performance of Buildings Directive in 2010

Energy Efficiency Directive in 2012 - EU's main

legislation to reduce energy consumption of buildings

with specified targets & commitment expected from

the government

SINGAPORE 2007 - The Sustainable Construction Masterplan with SGD50 million Ministry of National Development (MND) Research Fund for the Built Environment were introduced

2009- the Green Building Masterplan unveiled in 2009 with focused on greening existing buildings with specified strategies

POLICY EXAMPLES

APPLICATIONS OF INFORMATION TECHNOLOGY FOR EFFECTIVE

ENERGY EFFICIENCY PROGRAM MANAGEMENT SYSTEM

Intelligent Efficiency

5 KEY WAYS INTELLIGENT EFFICIENCY IS SHAPING THE MARKET

REDUCE COSTS OF REAL-TIME MONITORING & VERIFICATION Helping build trust among customers & creating new opportunities for projects

VIRTUAL ENERGY ASSESSMENTS CAPABILITY Offer energy data to the market, leveraging new lead opportunities for energy service professionals

WEB-BASED ENERGY MONITORING TOOLS Linking the energy efficiency &energy management markets in more dynamic ways

BIG DATA ANALYTICS Allowing companies to be predictive & proactive in efficiency

OPEN ACCESS TO INFORMATION Strengthening the relationship between utilities & customers Helping improve choices about efficiency and setting the foundation for the smart grid

HOW INTELLIGENT EFFICIENCY CREATES VALUE FOR INTENSIVE ENERGY USERS

Source:www.greentechmedia.com

Adoption of effective energy management

system technologies for energy performance

records & monitoring

Basic data collection &

reporting

Computerized management

system with operational controls

of key operating parameters

Key data gathering, energy

performance tracking,

measurement & reporting system

BARRIERS & PROPOSED COUNTER MEASURES

TO GROW ENERGY SERVICES INDUSTRY TO

ENHANCE ECONOMIC GROWTH

COMMON BARRIERS OF EE IN MALAYSIA…LACK OF…

•Clear policy & targets

•Comprehensive regulatory requirements & enforcement

•Competencies in institutional set up

Strong governance in policies implementation

•Competency programs

•Career opportunitiesTechnical competencies & human resource capacity

•Sources of funds

•Understanding of risks & mitigating factors in investments

Sustainable financing & business friendly mechanisms

•On EE practices

•Business opportunities

•Impacts of EE to climate change mitigation

Information ,education &awareness

•Funding

•Academic vs. Commercial valuesR&D & commercialization

No Silver Bullet!

Public-private Partnership

Creating A Market

Strong Political

Will

The Importance Of National

Context PROMOTING ENERGY

EFFICIENCY

INVESTMENTS THROUGH

POLICIES

IMPLEMENTATION: CASE

STUDIES FROM IEA

CONCLUSION AND THE WAY FORWARD

FOR ENERGY EFFICIENCY SERVICES

INDUSTRY

11TH MALAYSIA PLAN:CHAPTER 6-PURSUING GREEN GROWTH FOR SUSTAINABILITY & RESILIENCE

CONSERVING NATURAL RESOURCES

FOR PRESENT & FUTURE GENERATIONS

ADOPTING THE SUSTAINABLE CONSUMPTION

& PRODUCTION CONCEPT

Source: RMK11,EPU

STRENGTHENING RESILIENCE AGAINST

CLIMATE CHANGE & NATURAL DISASTERS

STRENGTHENING THE ENABLING ENVIRONMENT

FOR GREEN GROWTH

11TH MALAYSIA PLAN:ENHANCING DEMAND SIDE MANAGEMENT

FORMULATING

A COMPREHENSIVE DEMAND SIDE MASTER PLAN

EXPANDING

DEMAND SIDE MANAGEMENT MEASURES

Industries Buildings Households

Electrical

EnergyTransport Energy

Thermal Energy

FOR ENERGY SERVICE INDUSTRY DEVELOPMENT IN MALAYSIA

Strong

Governance &

regulatory

framework

Financing & business friendly

mechanisms

Accountable & competent implementing

agency

Information,

Education

&

Awareness

R&D &

Commercialization

INDUSTRY GROWTH

Policy Targets

Policy Introduction

Focused Sectors +Industry Players

+ Consumers

Industry players just need the basic & right “infrastructure” & supports.

We can take it from there!

CREATED

•Business & job opportunities

•More experts/workers from energy

efficiency industry

•New source of economic growth •More Direct Domestic Investments

CONNECSYS SDN BHDwww.cnsgroup.com.myzaini@cnsgroup.com.my

THANK YOU!