e) How do I select an ESCO?

South African ESCO Context

South Africa’s Energy Services Company (ESCO) industry is still in its developing stages and it consists of a number of small players with only few larger dominant ESCOs (IDC 2012). The South African Energy Development Initiative (SANEDI) is mandated to develop the Energy economy in South Africa. SANEDI have therefore been identified as an independent accreditation organisation in the country to develop an ESCO register with a view to developing the ESCO market. The ESCO register will ultimately create credibility amongst potential financial institutions and end users that are most likely to secure the services of the ESCO and provide finances to the ESCO.

The development of a publicly available ESCO register will promote the ESCO industry and it will increase the number of available accredited ESCOs in the country. An ESCO register will contain a list of ESCOs pertaining to technologies, qualifications and interested companies. ESKOM has an ESCO register for energy efficiency projects implemented under the ESKOM DSM scheme, however the SANEDI ESCO register will enable the accreditation of ESCOs through an open invitation and evaluation process.

The ESCOs contained in the SANEDI register will have qualified in terms of technical capacity and knowledge, financial ability of the company to invest in projects and business risk factors such as the track record of the ESCO. An evaluation of the ESCOs references and projects will be carried out and as assessment of the business financials was conducted.

Benefits of independent accreditation:

There are a number of benefits to using an independent accreditation system for ESCOs. These are summarised below.
  1. Recognition and categorisation of all reputable ESCOs which would provide a recent assessment of the ESCO industry; 
  2. The provision of technical due diligence on projects conducted by ESCOs; 
  3. Provide enhanced credibility and increased investor confidence; 
  4. The provision of a rating that will assist overcoming the barrier of inadequate information pertaining to performance contracting based on the ESCO. 
  5. Improved awareness on ESCOs that could generate larger energy efficiency projects. 

The ESCO register will help with the issuing Energy Performance Certificates and the compilation of Energy Performance Registers. The targeted release date for the SANEDI ESCO register is August 2016, and the register will be disseminated for public purpose after release. In order to register for accreditation, the ESCO has to register at a specified fee with the National Treasury via the central supplier database which can be used by government departments, state entities and municipalities to procure goods and services.

Measurement and Verification body

A M&V body is defined as a legal entity that has been accredited by the South African National Accreditation System (SANAS) with regards to the competence of its equipment, personnel and procedures. A M&V body could be made up of at least one person provided the requirements of all relevant clauses of SANS 17020 have been fulfilled. During the implementation of energy performance contracts, as the M&V body, the ESCO needs to be accredited with SANAS to ensure that it will comply with SANS 50010 regulations (SANS 50010).

Assessing an ESCO’s Competence: Key Questions

The following list of questions provides a guideline on assessing potential ESCO's competency. This list has been adapted from European PPP Expertise Centre 2012 Guidance on Energy Efficiency in Public Buildings

How long has the ESCO been in business?

  1. Does this ESCO have a proven track record in performing energy services projects? 
  2. Can it provide a list of satisfied clients? 
  3. What has been its performance (savings) on past projects? 
  4. How did the results compare with the original expectations?

Corporate capabilities

  1. Does the ESCO have strong core competencies in energy management and state-of-the-art technology? 
  2. Does the ESCO have the organisational depth to implement the project in a cost-effective and timely manner? 
  3. Does the ESCO have standard operating procedures? 
  4. Are they documented? How much freedom does the ESCO staff have to vary from them? 
  5. What is the expertise and experience of the project team (CVs and track record) that would be assigned to the project and of the support staff who would back them up?

Project implementation

  1. How experienced is the ESCO in minimizing the disruption to the workers in the public building(s) renovated? 
  2. What training will be provided to the public building operations staff? 
  3. What input will the public manager have regarding the design, construction and implementation of the project? 
  4. What input will the public manager have regarding the selection of equipment, suppliers and installers? 
  5. Does the ESCO have any restriction or bias regarding equipment, suppliers and installers?

Project performance

  1. Will the ESCO guarantee the recovery of all project costs and interest costs through the savings that are to be achieved within a guaranteed period of time? 
  2. Will the ESCO guarantee all savings or just a portion of savings? 
  3. Will the ESCO be ultimately responsible for every element of the project?

Project financing

  1. How will the project be financed and at what interest rate? 
  2. Will all project costs be disclosed? 
  3. How will any additions or extras be charged? 
  4. How can good value be ensured? 
  5. Will fees be consistent through the entire project?

Project capabilities

  1. Typical improvement measures installed 
  2. Design and project implementation procedures 
  3. Software support systems

Project management process

  1. Selection, use and control of subcontractors

Project capacity

  1. Number of concurrent projects that can be comfortably performed 
  2. Project managers and their respective project team

Scope of services

  1. Discrete services provided under energy performance contracting

Particular strengths of the ESCO

Services contracted out including the following 
  1. preliminary assessment of energy savings; 
  2. project management; 
  3. construction including provision of trades; 
  4. commissioning; 
  5. operator training; 
  6. procedure documentation; 
  7. mechanical and electrical maintenance; 
  8. invoicing system and methods for calculating savings; 
  9. remote measurement and savings performance evaluation; 
  10. project financing; and 
  11. energy services agreement negotiation.

Experience in energy performance contracting

  1. Description of EE and conservation projects during the last three years, where payment was not predicated on actual savings; 
  2. Description of experience in training of building operators, provision of building mechanical and electrical maintenance services, and energy use measurement; and 
  3. Description of EPC projects completed and in progress.

Financial stability

  1. Sufficient working capital and access to project financing; 
  2. Demonstration of adequate skills in financial 
  3. engineering at ESCO management level; 
  4. Adequate and appropriate insurance; and 
  5. Ability to comply with bonding requirements.

In general, companies are expected to:

Demonstrate their capability to provide comprehensive energy management services, in the relevant market sector, for plant, processes or facilities, including but not limited to: 
  1. comprehensive preliminary assessment of energy savings and feasibility analyses; design, engineering, selection and installation of equipment, systems and modifications to improve energy (and other resources) efficiency without reducing the reliability or performance of such equipment; 
    1. construction management; 
    2. training of clients’ operations and maintenance staff in energy-efficient practices; maintenance and service of installed measures; 
    3. measurement and verification of energy (and other resources) savings; and 
    4. financing for such projects. 
  2. Guarantee that payments for EE improvements will be contingent on energy savings so that the client will not have any financial obligations that exceed the avoided utility costs. 
  3. Outline their capability with respect to other related energy services including, but not limited to, technologies and applications of particular relevance to the client, e.g. boiler, compressed air, facility management and operations, (or other systems, power quality, HVAC, etc.). 
  4. The public partner evaluates the qualification information against pre-specified evaluation criteria producing a list of pre-qualified firms, which are invited to submit detailed proposals.