By Chris Mbori
If you have been in the energy space, you will not miss coming across the phrase “the money is in the projects” So many Energy professionals are thus very eager to get energy efficiency projects implemented. Very few of them however, ever get implemented especially after the energy audit report. Most energy consumers do not adopt energy efficiency measures because of some of the 5 below reasons:
- They are time poor and opt to concentrate on the running of their core business.
- They don’t experience consistent regulatory and investor pressure on emissions
- They need low-risk solutions but are poorly served by energy services companies
- They put their cash to work in other ways and do no prioritise energy efficiency
- They don’t trust the supply chain to deliver promised savings
Energy efficiency implementation has as a result lagged behind, and millions of dollars of attractive energy-saving investment has been locked away. The process of taking an energy project to execution would involve 5 steps as shown in the figure below. Each of these steps has its stumbling block.
So if you had 100 Energy Projects and you take them through the 5 steps, you would be lucky to have 3 executed. That’s about a 3% success rate!
Energy is critical for development. Demand for energy is expected to rise by 30-50% in the next two decades due to population growth and a focus towards increasing industrialization. Addressing energy efficiency is therefore key in ensuring that the future energy demand is met and is a central part of most countries’ development plans.
It is projected that Energy efficiency improvements could reduce projected capacity and energy production by 17% by 2050. This is because Energy efficiency drives prosperity more cost effectively than increasing power generation. In Kenya, energy efficiency is central to a Green Industrial Strategy and central to issues of economic development.
In 2020, we set out a project on how as energy professionals we could increase the number of projects that get implemented after an energy audit. We partnered GIZ, EnergyPro, Enso Impact and Institute of Energy Professionals (IEPA) to run a 12month program dubbed “Scaling Energy and Water Efficiency through the WESCO model”. What we discovered is In order to increase the flow of capital into energy efficiency, it is necessary to increase the following:
- the volume of projects being developed;
- the capacity to develop, transact and finance projects; and
- the volume of capital made available for energy efficiency.
There are four components that we therefore had to bring together. We called it the Jigsaw of energy efficiency finance. The jigsaw as shown below involves:
- Developing the energy pipeline through energy audits,
- Aggregating projects and offering more attractive implementation models like the ESCO model (A performance Contracting Model)
- Standardization of the development process, contracting and underwriting. We mapped out a standardized system called Esco in a Box developed by Energypro.
- Building capacity by training 10 Energy Engineers through a program dubbed Youth in Energy Empowerment Program (YEEP). These Energy Engineers where then attached to a select group of industries to provide capacity building efforts to the industries.
With the pipeline developed, two financing companies signed term sheets to provide finance for the developed projects through the ESCO model. By bringing the four components of the jigsaw together, we were able to increase the number of pipeline of projects, attract financing and create an employment opportunity for the 10 youth who participated in the YEEP. The industries too benefited by setting up of an energy management program that ensures implementation of energy efficiency projects and sustaining the energy and carbon savings.
Moving forward, we would want to extend this impact to more industry players. We seek to partner with more ESCOs and Funding Institutions to create a “Super Esco” structure that will reach out to a larger market while creating the needed impact of more jobs for the youth, reduce carbon and energy cost, increase energy efficiency and deployment of energy finance in the energy and renewable projects.