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This tool summarises the key details and results of combined ESCO and Aggregator market analysis in the EU. A SWOT (Strength, Weaknesses, Oppertunities and Threats method) analysis was carried out which estimates how the NOVICE model would interact when deployed in nine EU countries, from the point of view of the various stakeholders.

Using the drop down menus below, select the relevant country and stakeholder you represent to see the applicable results and recommendations.

Key words: DSR(Demand Side Response), EE(Energy Efficiency), EPC(Energy Performance Contract), BRP(Balance Responsibility Party), Dual/Joint Services, ROI(Return on Investment)

Results can also be seen in full here on the NOVICE website.

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Strengths of NOVICE model

  • Working with ESCOs on the RE:FIT and CEF frameworks will give access to the public sector clients that already use and trust this framework.
  • Being able to offer EE as well as DSR services by working with an ESCO will give the aggregator a USP.
  • Introductions to ESCO clients that have potential for DSR is an easier way to increase revenues for the aggregator than building relationships with new clients.

Weaknesses of NOVICE model

  • Aggregator does not build a direct relationship with the client.
  • Complexity of contractual arrangements increases when combining with EE.
  • Revenues are handled by the ESCO which could result in longer payment times for aggregator.
  • EE measures typically reduce the load available for participating in DSR, which reduces revenues for aggregators.

Opportunities for NOVICE model

  • The National Grid is under pressure due to the growth of small scale generation on the distribution network and large scale renewable on the transmission network. This makes it likely that they will increase the opportunities for participation in DR in coming years to cope with these changes.
  • The Power Responsive initiative aims to stimulate participation from industrial and commercial clients through distributed generation, storage and demand response. This will bring more opportunities for a range of size of clients from different sectors to participate in NOVCE style projects.
  • DR revenues could improve the business case for installing battery technology with renewables for accessing flexibility markets.
  • A number of trials for new DR mechanisms are underway which could lead to more opportunities for participation from different clients and sectors.

Threats to NOVICE model

  • Air quality regulations may restrict the use of diesel standby generators for DR in future.
  • There is a lack of transparency in the DSR market in the UK as many services are not procured through the open market and the TSO (National Grid) is able to exercise its discretion in awarding contracts. This makes it risky for new entrants to participate.
  • Tariffs associated with the various DR and flexibility markets vary from year to year making it difficult to estimate and guarantee the potential revenues from participating in DSR.
  • Relationship between BRP and aggregator not yet fully resolved making it difficult for aggregators to participate in some markets

Strengths of NOVICE model

  • Could reduce the cost of CRC compliance by making more expensive EE projects economically viable. In future, Climate Change Levy payments will be reduced by minimising energy consumption.
  • Can take advantage of smart grid options as part of EE investments.
  • NOVICE model offers shorter contract lengths with ESCO, faster payback, better ROI compared to traditional EPCs.
  • Only one contract is required covering both EE and DSR which reduces the administrative burden.
  • Can participate in DSR and EE without the need for in-house specialist skills.

Weaknesses of NOVICE model

  • Loss of some of the control of the operation of onsite equipment.
  • Some level of disruption to thermal comfort of building occupants and/or production levels during a DR event.
  • Long-term (several years) contract with the chosen ESCO and aggregator, which restricts the client’s ability to respond to changes in the business.

Opportunities for NOVICE model

  • Some evidence that smart buildings (energy efficient and flexible) have a higher resale and rental value in the UK.
  • Some evidence that smart buildings increase the health, comfort and productivity of the workforce.
  • Regulation allows generators to export to the grid which could allow them to bring idle equipment online at times of peak demand & receive additional payments.

Threats to NOVICE model

  • Brexit is causing uncertainty in all sectors making organisations less willing to participate in long term contracts or new business models.
  • Lack of transparency in the DSR market, its complexity and the changing nature of the market structure.

Strengths of NOVICE model

  • The NOVICE model will be a positive enhancement to the existing established public sector EPC frameworks RE:FIT and CEF.
  • Being able to offer EE as well as DSR services by working with an aggregator will give the ESCO a USP in the RE:FIT and CEF frameworks. Working with aggregators with existing industrial clients could give the ESCO access to the industrial market which is traditionally harder for ESCOs to penetrate.
  • NOVICE is a low risk, way of bringing demand side response skill set to the ESCO immediately, without large investment in training or developing in-house expertise.
  • The ability to provide DSR as well as EE services could reduce contract length and perceived risk which could help to persuade more private sector clients to use EPCs.
  • Introductions to aggregator clients that have potential for EE is an easier way to increase revenues for the aggregator than building relationships with new clients

Weaknesses of NOVICE model

  • EPCs are already complex. Adding an additional service may make it more difficult to persuade clients to sign up to an EPC.
  • As the ESCO is the client facing contractual service provider the financial and reputational risk associated with underperformance of the aggregator is borne by the ESCO.
  • Added complexity of administration and transaction costs related to managing revenue streams from DSR.
  • Relies on aggregator to accurately estimate potential revenues from DSR. Incorrect assumptions could result in not achieving the guaranteed level of performance

Opportunities for NOVICE model

  • Salix financing, RE:FIT and CEF have funding until at least 2020.
  • UK Government is committed to electrification of heat and increasing uptake of electric vehicles which will necessitate growth in the DSR market.
  • UK Government projections suggest 65% of energy will be generated locally by 2050 which will require flexible, smart buildings able to respond to changes in supply and demand. NOVICE model will help to achieve this in a range of buildings.

Threats to NOVICE model

  • The UK Government policies on energy efficiency and DSR post Brexit are, as yet, unclear. It is likely in the short term that existing regulations will remain in place, but the lack of targets stemming from EU Directives could allow the Government to change direction.
  • It is unclear how long mechanisms like Salix, RE:FIT and CEF will remain available, particularly post Brexit.
  • Uncertainty caused by Brexit negotiations could make both public and private sector organisations reluctant to commit to EPC contracts several years in duration.
  • Split incentives of energy efficiency benefits between landlords and tenants prevents many clients from participating.

Strengths of NOVICE model

  • Possible new revenue stream through offering the client DSR plus EE, or acting as a facilitator of EPC contracts.
  • Ability to facilitate the NOVICE approach gives FM company a USP.
  • Adding DSR to existing energy related contracts could generate a new revenue stream for FM companies.
  • Working with aggregators FM companies can provide an additional service to clients without need to train new staff or take on new risk.

Weaknesses of NOVICE model

  • The FM Company is the client facing contractual service provider so they bear the additional financial and reputational risk associated with underperformance of the aggregator.
  • The NOVICE model requires a more complex contractual arrangement with the client.
  • Relies on aggregator to accurately estimate potential revenues from DSR. Incorrect assumptions could result in not achieving the guaranteed level of performance.
  • If equipment or services do not meet client expectations FM personnel will be expected to fix the problem, increasing maintenance and repair costs.
  • Additional third party suppliers and additional technical infrastructure on site increases complexity and risk.

Opportunities for NOVICE model

  • Potential new service partnership models offered by EPC and DSR options.

Threats to NOVICE model

  • Brexit is causing uncertainty in all sectors making organisations less willing to participate in long term contracts or new business models.
  • Lack of transparency in the DSR market, its complexity and the changing nature of the market structure, make clients reluctant to participate.

Strengths of NOVICE model

  • The NOVICE model results in a second revenue stream for EPCs which reduces the risk of default on a loan.
  • EPCs operated under the NOVICE model have a potentially shorter payback period due to the inclusion of both EE and DSR revenue streams, giving more favourable returns on investment. Diversification of investment portfolio with new actors in the EPC market.
  • NOVICE presents potentially higher value projects with shorter payback periods which are more attractive to investors.
  • The advantages of NOVICE could attract finance outside of the established SALIX funding (e.g. higher proportion of private investors).

Weaknesses of NOVICE model

  • Revenues from DSR are difficult to predict with certainty which could introduce higher risk.
  • Finance is being provided to an ESCO for equipment that will be outside of their control, which increases the risk of loan default.

Opportunities for NOVICE model

  • Shorter paybacks and higher returns on investment could attract private sector funders to invest in NOVICE style projects.

Threats to NOVICE model

  • Uncertainty over the impact that Brexit will have on energy prices, and energy related legislation may cause financiers to be reluctant to invest in NOVICE style projects.
  • Lack of transparency in the DSR market, its complexity and the changing nature of the market structure, make financiers reluctant to invest.

Strengths of NOVICE model

  • Access to a greater range of load types and sizes for providing flexibility.

Weaknesses of NOVICE model

  • No incentive for BRPs to provide energy efficiency services to clients.
  • Building related demand response sources are more expensive to operate than hydroelectric sources.

Opportunities for NOVICE model

  • Sweden plan to significantly reduce their nuclear capacity and increase proportion of renewables on the grid in the coming years which will require an increase in the flexibility of buildings.
  • Sweden is currently working on methods of supporting the role of independent aggregators participating in the balancing markets.
  • Since the independent aggregation market is new it will be easier for new aggregators to assume dual roles and offer a wider range of services.
  • An electronic system to activate specific loads, instead of the current telephone authorisation system is being developed.
  • Regulations require network operators to set tariff structures that do not hamper participation in the DSR markets.

Threats to NOVICE model

  • The market for independent aggregators is currently non-existent and will take time to develop and mature.
  • There is no incentive for BRPs to offer energy efficiency services, work with ESCOs or enter into bilateral agreements with independent aggregators.
  • Low cost flexibility available from hydroelectric power makes it difficult to compete in the DSR market.
  • Integration with Nordic energy grid can bring foreign actors into play with more competitive price structures or better organization.

Strengths of NOVICE model

  • NOVICE model offers shorter contract lengths with ESCO, faster payback, better ROI compared to traditional EPCs.
  • Only one contract is required covering both EE and DSR which reduces the administrative burden.
  • Can participate in DSR and EE without the need for in-house specialist skills.

Weaknesses of NOVICE model

  • Unable to choose their aggregator since it must be the BRP at the moment.
  • Loses some of the control of the operation of onsite equipment. Client must accept some level of disruption to thermal comfort of building occupants and/or production levels during a DR event.
  • Locked in to a long-term (several years) contract with the chosen ESCO and aggregator, which restricts ability to respond to changes in the business.

Opportunities for NOVICE model

  • EPCs could be linked to the requirement for an energy audit every 4 years in large organisations.

Threats to NOVICE model

  • Periods of high energy price volatility can make it unattractive for clients to enter long-term EPC.

Strengths of NOVICE model

  • The ability to provide DSR as well as EE services could reduce contract length and perceived risk which could kick-start the EPC market in Sweden.
  • The NOVICE model could be presented as a best practice example of a complete EPC to encourage uptake – it doesn’t have to compete with traditional EPC models as these have not yet gained traction in Sweden.
  • Could attract large industrial clients, traditionally not the target market for ESCOs.

Weaknesses of NOVICE model

  • There are currently no independent aggregators in Sweden. It’s unlikely that a BRP would want to collaborate with an ESCO.
  • EPCs are already complex. Adding an additional service may make it more difficult to persuade clients to sign up to an EPC.

Opportunities for NOVICE model

  • Sweden have targets to improve energy efficiency by 50% by 2030 which could drive further uptake of EPCs.
  • Sweden is currently working on methods of supporting the role of independent aggregators participating in the balancing markets.

Threats to NOVICE model

  • Lack of examples of successful EPC contracts in public & private sector has led to a low uptake of EPCs in Sweden.
  • There are no longer any government backed finance initiatives supporting uptake of energy efficiency which has caused a slowdown of EPC market.
  • Clients, building owners and FM companies are relatively unaware of the opportunities available in EE and DSR.
  • Low cost flexibility available from hydroelectric power makes it difficult to compete in the DSR market.

Strengths of NOVICE model

  • Possible new revenue stream through acting as an EPC facilitator.
  • Ability to facilitate the NOVICE approach gives FM company a USP as there are not many EPC facilitators in Sweden.

Weaknesses of NOVICE model

  • The NOVICE model requires a more complex contractual arrangement with the client.
  • If equipment or services do not meet client expectations FM personnel will be expected to fix the problem, increasing maintenance and repair costs.
  • Additional third party suppliers and additional technical infrastructure on site increases complexity and risk.

Opportunities for NOVICE model

  • Potential new service partnership models offered by EPC and DSR options.

Threats to NOVICE model

  • Periods of high energy price volatility can make it unattractive for clients to enter long-term EPC.

Strengths of NOVICE model

  • The NOVICE model results in a second revenue stream for EPCs which reduces the risk of default on a loan.
  • EPCs operated under the NOVICE model have a potentially shorter payback period due to the inclusion of both EE and DSR revenue streams, giving more favourable returns on investment.
  • Diversification of investment portfolio with new actors in the EPC market.
  • NOVICE presents potentially higher value projects with shorter payback periods which are more attractive to investors.

Weaknesses of NOVICE model

  • Revenues from DSR are difficult to predict with certainty which could introduce higher risk.
  • Finance is being provided to an ESCO for equipment that will be outside of their control, which increases the risk of loan default.

Opportunities for NOVICE model

  • Proposed changes in legislation around the status of the aggregator give financiers more confidence that there is government support for NOVICE model contracts.
  • Government commitment to reduce use of nuclear gives more confidence that NOVICE style EPCs are secure investments.
  • There is an opportunity to develop a specific credit line linked to energy efficiency since most banks that lend to public sector offer the same terms for all projects.

Threats to NOVICE model

  • Few government subsidies available for EPCs making it harder for projects to demonstrate financial viability.
  • Small market size means loans are likely to be offered at non-preferential rates, and can restrict the number of financiers interested in participating.
  • Most public sector clients are able to self-finance.

Strengths of NOVICE model

  • The number of large loads >4 MW in Ireland is limited so aggregators will need to develop new products like NOVICE in order to survive in the long term.
  • Being able to offer EE as well as DSR services by working with an ESCO will give the aggregator a USP.
  • Introductions to ESCO clients that have potential for DSR is an easier way to increase revenues for the aggregator than building relationships with new clients.
  • EPC market is forecast to grow so being able to access this market using the NOVICE model could increase revenues.

Weaknesses of NOVICE model

  • Every site must fulfil technical and prequalification requirements which is time consuming and costly for smaller sites.
  • Aggregator does not build a direct relationship with the client.
  • ESCOs are not mature in terms of market experience and their services are not widely known so potentially limited benefit of working together.
  • Complexity of contractual arrangements increases when combining with energy efficiency.
  • Revenues are handled by the ESCO which could result in longer payment times.
  • EE measures typically reduce the load available for participating in DSR, which reduces revenues for aggregators.

Opportunities for NOVICE model

  • The TSO has regularly adjusted the demand response programmes and the associated rules for participation to better fit the capabilities of service providers.
  • Ireland’s target of 40% renewable electricity by 2020 and the expansion of wind energy is driving the need for more flexibility on the market which will lead to more opportunities for aggregators as the market develops.
  • DSOs are expected to need demand side flexibility services in the near future to manage congestion at the distribution network level, which would work well with the NOVICE model due to the size of building likely to be involved.
  • DR revenues could improve the business case for installing battery technology with renewables for accessing flexibility markets.

Threats to NOVICE model

  • Aggregators are allowed to bid either for DR only or Generation only contracts – i.e. DR and Generation cannot be aggregated into one bid.
  • Prequalification requirements could become more stringent and more costly over time.
  • Bidding for provision of DSR services takes place annually. Once bidding has closed, new entrants cannot enter the DSR market until the next year. This could cause delays to NOVICE style projects.

Strengths of NOVICE model

  • NOVICE model offers shorter contract lengths with ESCO, faster payback, better ROI compared to traditional EPCs.
  • Only one contract is required covering both EE and DSR which reduces the administrative burden on the client.
  • Reduces financial burden of complying with building regulations when renovating more than 25% of building envelope.
  • Can participate in DSR and EE without the need for in-house specialist skills.

Weaknesses of NOVICE model

  • Client loses some of the control of the operation of onsite equipment.
  • Client must accept some level of disruption to thermal comfort of building occupants and/or production levels during a DR event.
  • Locked in to a long-term (several years) contract with the chosen ESCO and aggregator, which restricts the client’s ability to respond to changes in the business.

Opportunities for NOVICE model

  • There is a wide array of incentives and tax deductions allow some clients to access tax credits for energy renovations.
  • The Energy Efficiency Fund can provide loans for EPC style contracts that mean no upfront capital is required for NOVICE style projects.
  • Regulatory framework allows generators to export to the grid which could allow them to bring idle equipment online at times of peak demand & receive additional payments.

Threats to NOVICE model

  • Periods of high energy price volatility can make it unattractive for clients to enter long-term EPC.
  • In times of political uncertainty, tax credits could be removed with relatively short notice, hindering taking decisions on long-term renovation plans.

Strengths of NOVICE model

  • NOVICE is a low risk, way of bringing demand side response skill set to the ESCO immediately, without large investment in training or developing in-house expertise.
  • The ability to provide DSR as well as EE services could reduce contract length and perceived risk which could help alleviate the fears of potential public and private sector clients and kick-start the EPC market in Ireland.
  • The NOVICE model could be presented as a best practice example of a complete EPC to encourage uptake via the NESF – it doesn’t have to compete with traditional EPC models as these have not yet gained traction in Ireland.
  • Will give the ESCO a unique selling point.
  • Introductions to aggregator clients that have potential for EE is an easier way to increase revenues.

Weaknesses of NOVICE model

  • EPCs are already complex. Adding an additional service may make it more difficult to persuade clients to sign up to an EPC.
  • Aggregators and their services are not widely known to potential clients which could make the NOVICE model harder to sell than a traditional EPC.
  • As the ESCO is the client facing contractual service provider the financial and reputational risk associated with underperformance of the aggregator is borne by the ESCO.
  • Added complexity of administration and transaction costs related to managing revenue streams from DSR.
  • Relies on aggregator to accurately estimate potential revenues from DSR. Incorrect assumptions could result in not achieving the guaranteed level of performance.

Opportunities for NOVICE model

  • Numerous tax incentives and EE policies create opportunities for EPCs in the Irish market e.g. ACA capital allowances, Energy Efficiency Fund, NESF.
  • Reforms to the electricity market and DS3 programme make it possible for smaller buildings to participate in DSR. Further markets are likely to open in future.
  • Irelands Long Term Renovation Strategy 2017-2020 suggests that the commercial sector has already reduced energy consumption through no cost behavioural measures and must now invest in equipment and envelope upgrades to improve efficiency further. EPCs covering EE and DSR offer a way of achieving this with minimal cost to the client.
  • EPC market is largely untapped to date meaning that there is high potential for growth.

Threats to NOVICE model

  • Lack of examples of successful EPC contracts in public & private sector has led to a low uptake of EPCs in Ireland. There is general mistrust or lack of understanding preventing large scale roll out of EPCs.
  • Electricity tariff structure is relatively flat which does not encourage implicit demand response.
  • Clients, building owners and FM companies are relatively unaware of the opportunities available in EE and DSR and lack understanding in these areas making it difficult to sell a NOVICE style approach to them.

Strengths of NOVICE model

  • Possible new revenue stream through offering the client DSR plus EE, or acting as a facilitator of EPC contracts.
  • Ability to facilitate the NOVICE approach gives FM company a USP as there are not many EPC facilitators in Ireland.
  • Adding DSR to existing energy related contracts could generate a new revenue stream for FM companies.
  • Working with aggregators FM companies can provide an additional service to clients without need to train new staff or take on new risk.

Weaknesses of NOVICE model

  • The FM Company is the client facing contractual service provider so they bear the additional financial and reputational risk associated with underperformance of the aggregator.
  • The NOVICE model requires a more complex contractual arrangement with the client.
  • Relies on aggregator to accurately estimate potential revenues from DSR. Incorrect assumptions could result in not achieving the guaranteed level of performance.
  • If equipment or services do not meet client expectations FM personnel will be expected to fix the problem, increasing maintenance and repair costs.
  • Additional third-party suppliers and additional technical infrastructure on site increases complexity and risk.

Opportunities for NOVICE model

  • Potential new service partnership models offered by EPC and DSR options.
  • Legislation framework facilitates their association with ESCOs and aggregators as their roles and responsibilities are clearly defined.

Threats to NOVICE model

  • Periods of high energy price volatility can make it unattractive for clients to enter long-term EPC.
  • In times of political uncertainty, tax credits could be removed with relatively short notice, hindering taking decisions on long-term renovation plans.

Strengths of NOVICE model

  • The NOVICE model results in a second revenue stream for EPCs which reduces the risk of default on a loan.
  • EPCs operated under the NOVICE model have a potentially shorter payback period due to the inclusion of both EE and DSR revenue streams, giving more favourable returns on investment.
  • Diversification of investment portfolio with new actors in the EPC market.
  • NOVICE presents potentially higher value projects with shorter payback periods which are more attractive to investors.

Weaknesses of NOVICE model

  • Revenues from DSR are difficult to predict with certainty which could introduce higher risk.
  • Finance is being provided to an ESCO for equipment that will be outside of their control, which increases the risk of loan default.

Opportunities for NOVICE model

  • High degree of certainty in continued government support for EE and DSR initiatives give confidence to investors that revenues from NOVICE projects are secure.
  • Robust energy regulatory framework gives confidence that long-term revenue streams are available using a NOVICE approach.

Threats to NOVICE model

  • Financial default by parties who cannot meet specific terms of the EPC due to distorted risk assessment, sharp changes in energy prices, or weather occurrences that influence energy production and savings estimations.
  • TSO is regularly changing the DR schemes and payment levels introducing uncertainty into the business model.
  • Little sign of the EPC market growing in recent years.
  • Smaller NOVICE style projects, (under €500k) could be subject to higher interest rates which makes them less favourable.

Strengths of NOVICE model

  • NOVICE is a low risk, way of bringing demand side response skill set to an ESCO immediately, without large investment in training or developing in-house expertise.
  • The ability to provide DSR as well as EE services is a unique selling point and is a simpler way of generating more revenue for you (the ESCO) than finding new clients.
  • Working with aggregators brings access to new markets e.g. the industrial sector, a key market for aggregators but one which has traditionally been avoided by ESCOs in France.

Weaknesses of NOVICE model

  • As the ESCO is the client facing party, the risk associated with underperformance of the aggregator is borne by the ESCO.
  • EPCs are already complex; adding an additional service may make it more difficult to persuade clients to sign up to an EPC. The model relies on the aggregator to accurately estimate potential revenues from DSR. Incorrect assumptions could result in not achieving the guaranteed level of performance.

Opportunities for NOVICE model

  • Numerous tax incentives and energy efficiency policies create opportunities for expanding NOVICE into the residential and social housing sectors.
  • Tariff structure allows for variable pricing mechanisms to account for peak times and critical peak pricing to encourage load shifting or DR.
  • ESCOs could offer joint services without requiring a third party to be involved.
  • The LTECV and Thermal regulations require EE upgrades during renovation projects which encourages clients to consider EPCs.
  • The French government is planning to reduce the share of nuclear and increase the share of renewables on the grid. This will require additional DR capabilities to cope with variability in supply.

Threats to NOVICE model

Threats to NOVICE model
  • Interest in participating is highly motivated by state subsidies and policies that can be modified or phased out according to political interests.
  • Change in state policies affecting relationship of public building sector (currently the largest client sector for EPC) with ESCOs.

Strengths of NOVICE model

  • NOVICE model offers shorter contract lengths with ESCO, faster payback, better ROI compared to traditional EPCs.
  • Only one contract is required covering both EE and DSR which reduces the administrative burden on the client.
  • Reduces the financial burden of complying with regulations (e.g. LTEVC and thermal regulations) when renovating large buildings.

Weaknesses of NOVICE model

  • Client loses some of the control of the operation of onsite equipment. There may be some level of disruption to thermal comfort of building occupants and/or production levels during a DR event.
  • As client is locked in to a long-term (several years) contract with the chosen ESCO and aggregator, which could come with restrictions.

Opportunities for NOVICE model

  • There is a wide array of incentives and tax deductions allow some clients to access tax credits for energy renovations.
  • Regulatory framework allows generators to export to the grid, which could allow them to bring idle equipment online at times of peak demand & receive additional payments.

Threats to NOVICE model

  • Periods of high energy price volatility can make unattractive for clients to enter long-term EPC.
  • In times of political uncertainty, tax credits could be removed with relatively short notice, affecting taking decisions on long-term plans.

Strengths of NOVICE model

  • An easier way to increase revenues for the aggregator than building relationships with new clients is to use ESCOs which already have a large client base, through which they can introduce demand service response as an additional service.
  • ESCOs are well trusted by the market so working with them will allow easier access to new clients in new sectors e.g. public sector where traditionally ESCOs are strong but aggregators are weak.
  • Being able to offer EE as well as DR services will give the aggregator a unique selling point.

Weaknesses of NOVICE model

  • Aggregator does not build a direct relationship with the client.
  • Complex contractual arrangements when combining with EE.
  • Significant proportion of revenues from DSR go to retailer rather than client or aggregator so little financial gain from offering dual services. Revenues are handled by the ESCO which could result in longer.
  • payment times for aggregator. EE measures typically reduce the load available for participating in DSR, which reduces revenues for aggregators.

Opportunities for NOVICE model

  • The TSO (transmission service operator) has regularly adjusted the DR programmes and the associated rules for participation to better fit the capabilities of service providers.
  • In France many markets are open for participation including balancing mechanism, capacity mechanism, ancillary services wholesale markets and distribution network services creating many opportunities for aggregators to work with building owners.
  • Existing regulatoryframework clearly defines the relationship between aggregators and retailers/BRPs, facilitating association.
  • Generators and CHP plants are allowed to export to the grid and receive payment for the energy generated creating the opportunity to bring existing plant online during times of peak demand.
  • Combining feed in tariffs with export tariffs and DR revenues could improve the business case for installing battery technology for accessing flexibility markets

Threats to NOVICE model

  • Significant proportion of DR revenues are allocated to retailers and suppliers to the detriment of aggregators which can weaken the business case.
  • DR and Generation cannot be aggregated into one contract bid.

Strengths of NOVICE model

  • Ability to facilitate the NOVICE approach gives FM company a unique selling point.
  • Adding DSR to existing energy related contracts could generate a new revenue stream for FM companies.
  • Working with aggregators FM companies can provide an additional service to clients without need to train new staff or take on new risk.

Weaknesses of NOVICE model

  • The FM Company is the client facing contractual service provider, so they bear the additional financial and reputational risk associated with underperformance of the aggregator.
  • The NOVICE model requires a more complex contractual arrangement with the client.
  • Relies on aggregator to accurately estimate potential revenues from DSR. Incorrect assumptions could result in not achieving the guaranteed level of performance.
  • If equipment or services do not meet client expectations FM personnel will be expected to fix the problem, increasing maintenance and repair costs.
  • Additional third-party suppliers and additional technical infrastructure on site increases complexity and risk.

Opportunities for NOVICE model

  • Potential new service partnership models offered by EPC and DSR options.
  • Legislation framework facilitates their association with ESCOs and aggregators as their roles and responsibilities are clearly defined.

Threats to NOVICE model

  • Periods of high energy price volatility can make unattractive for clients to enter long-term EPC.
  • In times of political uncertainty, tax credits could be removed with relatively short notice, hindering taking decisions on long-term renovation plans.

Strengths of NOVICE model

  • The case for financing for aggregation is strengthened by working with well-established ESCOs. The NOVICE model results in a second revenue stream for EPCs which reduces the risk of default on a loan.
  • EPCs operated under the NOVICE model have a potentially shorter payback period due to the inclusion of both EE and DSR revenue streams, giving more favourable returns on investment.
  • Investment portfolio is diversified with new actors in the EPC market.

Weaknesses of NOVICE model

  • Revenues from DSR are difficult to predict with certainty which could introduce higher risk.
  • Finance is being provided to an ESCO for equipment that will be outside of their control, which increases the risk of loan default.

Opportunities for NOVICE model

  • Sustainable growth in ESCO and DSR market is forecasted, giving more certainty to investors of higher ROIs on combined projects.
  • High degree of certainty in continued government support for EE and DSR initiatives give confidence to investors that revenues from NOVICE projects are secure.
  • Robust energy regulatory framework gives confidence that long-term revenue streams are available using a NOVICE approach.

Threats to NOVICE model

  • Financial default by parties who cannot meet specific terms of the EPC due to distorted risk assessment, sharp changes in energy prices, or weather occurrences that influence energy production and savings estimations.
  • TSO is regularly changing the DR schemes and payment levels introducing uncertainty into the business model.

Strengths of NOVICE model

  • Finance providers are already familiar with the EPC model of upfront financing and payments through savings which helps the aggregator deal with some of the administrative costs of accessing the DSR markets.
  • ESCOs already have a large client base through which they can introduce DSR as an additional service. This is an easier way to increase revenues for the aggregator than building relationships with new clients.
  • ESCOs are well trusted by the market so working with them will allow easier access to new clients in new sectors e.g. public sector where traditionally ESCOs are strong but aggregators are weak.
  • Being able to offer EE as well as DSR services will give the aggregator a USP.

Weaknesses of NOVICE model

  • Aggregator does not build a direct relationship with the client.
  • Setting up DSR contracts is already highly complex due to the requirement for agreements with TSO, DSO, BRP and client and adding energy efficiency increases complexity further.
  • Revenues are handled by the ESCO which could result in longer payment times for aggregator.
  • EE measures typically reduce the load available for participating in DSR, which reduces revenues for aggregators.

Opportunities for NOVICE model

  • The target to have climate neutral buildings by 2050 will drive the need for refurbishment and flexibility in buildings. The NOVICE model allows aggregators to tap into this market.
  • There are several grants, soft loans and support schemes available to ESCOs and their clients. Absorbing DSR into an EPC via an ESCO allows the aggregator to take advantage of some of these support schemes.

Threats to NOVICE model

  • Tariff structure promotes flat consumption profiles which puts off clients from participating in flexibility programmes.
  • Individual assets (rather than pooled loads) must be prequalified with every TSO (there are 4 in Germany) which makes it less viable to implement NOVICE in buildings with smaller loads.
  • DSO can block participation in DSR market if they deem it necessary or cause unnecessary delays during project approval.
  • BRPs can block independent aggregators from participating in the DSR market as they are seen as competitors offering similar services.

Strengths of NOVICE model

  • NOVICE model offers shorter contract lengths with ESCO, faster payback, better ROI compared to traditional EPCs.
  • Only one contract is required covering both EE and DSR which reduces the administrative burden on the client.
  • Reduces financial burden of complying with regulations when renovating large buildings.

Weaknesses of NOVICE model

  • Participating in DSR could reduce the premium discounts received for flat consumption profiles.
  • Client loses some of the control of the operation of onsite equipment.
  • Client must accept some level of disruption to thermal comfort of building occupants and/or production levels during a DR event.
  • Locked in to a long-term (several years) contract with the chosen ESCO and aggregator, which restricts the client’s ability to respond to changes in the business.

Opportunities for NOVICE model

  • There is a wide array of incentives and tax deductions allow some clients to access tax credits for energy renovations.
  • TSO is open to adapting its products to encourage consumer participation in DSR market which could allow participation in more DSR markets in future

Threats to NOVICE model

  • Periods of high energy price volatility can make unattractive for clients to enter long-term EPC.
  • In times of political uncertainty, tax credits could be removed with relatively short notice, hindering taking decisions on long-term renovation plans.

Strengths of NOVICE model

  • NOVICE is a low risk, way of bringing demand side response skill set to the ESCO immediately, without large investment in training or developing in-house expertise.
  • The ability to provide DSR as well as EE services allows upselling of additional services to existing clients which is an easier way of generating more revenue for the ESCO than finding new clients.
  • Working with aggregators brings access to new markets e.g. the industrial sector, a key market for aggregators but one which is less common for ESCOs in Germany.
  • Offering DSR as well as EE services will give ESCO a USP in an already crowded market.

Weaknesses of NOVICE model

  • Administrative burden of gaining agreement from TSO, DSO, BRP and client could cause significant delay to projects.
  • Not many DSR markets are easily accessible so the number of sites that are suitable for a NOVICE style contract is small.
  • EPCs are already complex. Adding an additional service may make it more difficult to persuade clients to sign up to an EPC.
  • As the ESCO is the client facing contractual service provider the financial and reputational risk associated with underperformance of the aggregator is borne by the ESCO. Added complexity of administration and transaction costs related to managing revenue streams from DSR.
  • Relies on aggregator to accurately estimate potential revenues from DSR. Incorrect assumptions could result in not achieving the guaranteed level of performance.

Opportunities for NOVICE model

  • The German Federal Ministry for Economic Affairs and Energy is consulting with stakeholders to remove barriers to participation in the DSR market. This will make NOVICE model easier to implement in future.
  • The German Government’s commitment to phasing out nuclear and increasing renewables on the grid means that changes to improve accessibility of the DSR market are inevitable, which favours the NOVICE approach.
  • German public sector has more stringent targets and are expected to be exemplary – NOVICE model would help them achieve this.
  • Federal Government is supportive of measures to open up the EPC market to SMEs offering EPCs through simplified contracting models and a guarantor programme.

Threats to NOVICE model

  • Federal authorities restrict the approval of EPCs in local authorities due to debt levels. This would restrict implementation of NOVICE style EPCs in areas that would benefit most from this model.
  • Interest in participating is highly motivated by state subsidies and policies that can be modified or phased out according to political interests.
  • Change in discount percentages from those subsidies can potentially define profitability or default.
  • Change in state policies affecting relationship of public building sector (currently the largest client sector for EPC) with ESCOs

Strengths of NOVICE model

  • Ability to facilitate the NOVICE approach gives FM company a unique selling point.
  • Adding DSR to existing energy related contracts could generate a new revenue stream for FM companies.
  • Working with aggregators FM companies can provide an additional service to clients without need to train new staff or take on new risk.

Weaknesses of NOVICE model

  • The FM Company is the client facing contractual service provider, so they bear the additional financial and reputational risk associated with underperformance of the aggregator.
  • The NOVICE model requires a more complex contractual arrangement with the client.
  • Relies on aggregator to accurately estimate potential revenues from DSR. Incorrect assumptions could result in not achieving the guaranteed level of performance.
  • If equipment or services do not meet client expectations FM personnel will be expected to fix the problem, increasing maintenance and repair costs.
  • Additional third party suppliers and additional technical infrastructure on site increases complexity and risk.

Opportunities for NOVICE model

  • Potential new service partnership models offered by EPC and DSR options

Threats to NOVICE model

  • Periods of high energy price volatility can make unattractive for clients to enter long-term EPC.
  • In times of political uncertainty, tax credits could be removed with relatively short notice, hindering taking decisions on long-term renovation plans.

Strengths of NOVICE model

  • Case for financing for aggregation is strengthened by working with well-established ESCOs.
  • The NOVICE model results in a second revenue stream for EPCs which reduces the risk of default on a loan.
  • EPCs operated under the NOVICE model have a potentially shorter payback period due to the inclusion of both EE and DSR revenue streams, giving more favourable returns on investment.
  • Diversification of investment portfolio with new actors in the EPC market.

Weaknesses of NOVICE model

  • Revenues from DSR are difficult to predict with certainty which could introduce higher risk.
  • Finance is being provided to an ESCO for equipment that will be outside of their control, which increases the risk of loan default.
  • DSR market is undergoing change and reform which increases uncertainty and risk.

Opportunities for NOVICE model

  • Forecasted sustained growth in ESCO and DSR market gives more certainty to investors of higher ROIs on combined projects.
  • High degree of certainty in continued government support for EE and DSR initiatives give confidence to investors that revenues from NOVICE projects are secure.

Threats to NOVICE model

  • Low cost of energy increases payback periods.
  • DSR market is likely to undergo reforms which introduces uncertainty until the new system is in operation

Strengths of NOVICE model

  • Access to a greater range of load types and sizes for providing flexibility

Weaknesses of NOVICE model

  • No incentive for BRPs to provide energy efficiency services to clients.
  • Low price for demand response services results in a weak business case.

Opportunities for NOVICE model

  • Denmark plan to significantly increase proportion of renewables on the grid in the coming years which will require an increase in the flexibility of buildings.
  • Denmark is currently working on methods of supporting the role of independent aggregators participating in the balancing markets.
  • Associating through the NOVICE model could bring benefits for a potential export tariff due to the opening of Nordic markets, as they would be better organized and prepared.
  • Since the independent aggregation market is new it will be easier for new aggregators to assume dual roles and offer a wider range of services.
  • A NOVICE model consortium can avail more easily from research funds such as those to investigate new energy saving models, e.g. for district cooling.

Threats to NOVICE model

  • The market for independent aggregators is currently non-existent and will take time to develop and mature.
  • No incentive for BRPs to offer energy efficiency services, work with ESCOs or enter into bilateral agreements with independent aggregators.
  • There is currently no demand from DSOs and TSOs for flexibility services as the grid is able to cope well with balancing supply and demand.
  • DSR market currently favours large generators rather than smaller demand response loads.
  • Integration with Nordic energy grid can bring foreign actors into play with more competitive price structures or better organization.

Strengths of NOVICE model

  • NOVICE model offers shorter contract lengths with ESCO, faster payback, better ROI compared to traditional EPCs.
  • Only one contract is required covering both EE and DSR which reduces the administrative burden.
  • Can participate in DSR and EE without the need for in-house specialist skills.

Weaknesses of NOVICE model

  • Cannot choose their aggregator since it must be the BRP at the moment.
  • Loses some of the control of the operation of onsite equipment.
  • Some level of disruption to thermal comfort of building occupants and/or production levels during a DR event.
  • Locked in to a long-term (several years) contract with the chosen ESCO and aggregator, which restricts the client’s ability to respond to changes in the business.

Opportunities for NOVICE model

  • EPCs could be linked to the requirement for an energy audit every 4 years in large organisations.

Threats to NOVICE model

  • Periods of high energy price volatility can make it unattractive for clients to enter long-term EPC.

Strengths of NOVICE model

  • Combining DSR with EE can give ESCOs a USP.
  • The ability to provide DSR as well as EE services could reduce contract length which could attract large industrial clients, traditionally not the target market for ESCOs.
  • NOVICE model gives incentives to develop the ESCO market through new products.

Weaknesses of NOVICE model

  • There are currently no independent aggregators in Denmark. It’s unlikely that a BRP would want to collaborate with an ESCO.
  • EPCs are already complex. Adding an additional service may make it more difficult to persuade clients to sign up to an EPC.

Opportunities for NOVICE model

  • Denmark have targets to improve energy efficiency by 14.5% by 2030 which could drive further uptake of EPCs.
  • Denmark is currently working on methods of supporting the role of independent aggregators participating in the balancing markets.
  • NOVICE model can be promoted through the Danish Energy Agency, which disseminates information and best practice concerning ESCOs and in particular to energy renovations.
  • A NOVICE model consortium can avail more easily from research funds such as those to investigate new energy saving models, e.g. for district cooling.

Threats to NOVICE model

  • Clients, building owners and FM companies are relatively unaware of the opportunities available in EE and DSR and lack understanding in these areas making it difficult to sell a NOVICE style approach to them.
  • There is currently no demand from DSOs and TSOs for flexibility services as the grid is able to cope well with balancing supply and demand.
  • Offering DSR services requires agreement from the customer’s BRP which is difficult and time consuming to obtain, and can block participation.

Strengths of NOVICE model

  • Access to a greater range of load types and sizes for providing flexibility

Weaknesses of NOVICE model

  • No incentive for BRPs to provide energy efficiency services to clients.
  • Low price for demand response services results in a weak business case.

Opportunities for NOVICE model

  • Denmark plan to significantly increase proportion of renewables on the grid in the coming years which will require an increase in the flexibility of buildings.
  • Denmark is currently working on methods of supporting the role of independent aggregators participating in the balancing markets.
  • Associating through the NOVICE model could bring benefits for a potential export tariff due to the opening of Nordic markets, as they would be better organized and prepared.
  • Since the independent aggregation market is new it will be easier for new aggregators to assume dual roles and offer a wider range of services.
  • A NOVICE model consortium can avail more easily from research funds such as those to investigate new energy saving models, e.g. for district cooling.

Threats to NOVICE model

  • The market for independent aggregators is currently non-existent and will take time to develop and mature.
  • There is no incentive for BRPs to offer energy efficiency services, work with ESCOs or enter into bilateral agreements with independent aggregators.
  • There is currently no demand from DSOs and TSOs for flexibility services as the grid is able to cope well with balancing supply and demand.
  • DSR market currently favours large generators rather than smaller demand response loads.
  • Integration with Nordic energy grid can bring foreign actors into play with more competitive price structures or better organization.

Strengths of NOVICE model

  • The NOVICE model results in a second revenue stream for EPCs which reduces the risk of default on a loan.
  • EPCs operated under the NOVICE model have a potentially shorter payback period due to the inclusion of both EE and DSR revenue streams, giving more favourable returns on investment.
  • Diversification of investment portfolio with new actors in the EPC market.
  • NOVICE presents potentially higher value projects with shorter payback periods which are more attractive to investors.

Weaknesses of NOVICE model

  • Revenues from DSR are difficult to predict with certainty which could introduce higher risk.
  • The collaboration suggested by NOVICE needs further testing due to the underdeveloped aggregator market.

Opportunities for NOVICE model

  • Proposed changes in legislation around the status of the aggregator give financiers more confidence that there is government support for NOVICE model contracts.
  • Government commitment to increase the amount of renewables on the grid gives more confidence that NOVICE style EPCs are secure investments.

Threats to NOVICE model

  • Few government subsidies or formal frameworks available for EPCs making it harder for projects to demonstrate financial viability.

Strengths of NOVICE model

  • Being able to offer EE as well as DSR services by working with an ESCO will give the aggregator a USP.
  • Introductions to ESCO clients that have potential for DSR is an easier way to increase revenues for the aggregator than building relationships with new clients.
  • EPC market is forecast to grow so being able to access this market using the NOVICE model could increase revenues.

Weaknesses of NOVICE model

  • Aggregator does not build a direct relationship with the client.
  • ESCOs are not mature in terms of market experience and their services are not widely known so potentially limited benefit of working together.
  • Complexity of contractual arrangements increases when combining with energy efficiency.
  • EPC market is forecast to grow so being able to access this market using the NOVICE model could increase revenues.
  • Revenues are handled by the ESCO which could result in longer payment times for aggregator.
  • EE measures typically reduce the load available for participating in DSR, which reduces revenues for aggregators.

Opportunities for NOVICE model

  • Belgium plan to significantly reduce their nuclear capacity and increase proportion of renewables on the grid in the coming years which will require an increase in the flexibility of buildings.
  • A new law that formalises the role of the aggregator and removes the need for agreement from the BRP will make the NOVICE model more attractive for aggregators.
  • Lack of legal framework makes it easier to assume dual roles and offer a wider range of services.

Threats to NOVICE model

  • DSOs can block or delay participation in DSR markets.
  • Bureaucracy around energy regulations and differences between regions can cause difficulties in participation in the energy markets.

Strengths of NOVICE model

  • NOVICE model offers shorter contract lengths with ESCO, faster payback, better ROI compared to traditional EPCs.
  • Only one contract is required covering both EE and DSR which reduces the administrative burden.
  • Can participate in DSR and EE without the need for in-house specialist skills.

Weaknesses of NOVICE model

  • Customers cannot choose who their aggregators will be as this requires bilateral contracts between BRP and aggregator.
  • Loss of some of the control of the operation of onsite equipment.
  • Some level of disruption to thermal comfort of building occupants and/or production levels during a DR event.
  • Locked in to a long-term (several years) contract with the chosen ESCO and aggregator, which restricts ability to respond to changes in the business

Opportunities for NOVICE model

  • Access to premium payments from network operators for investment in energy efficiency measures increases financial viability of projects.

Threats to NOVICE model

  • Periods of high energy price volatility can make it unattractive to enter long-term EPC.
  • In times of political uncertainty, tax credits could be removed with relatively short notice, hindering taking decisions on long-term renovation plans.

Strengths of NOVICE model

  • Public sector ESCOs that provide a platform for third party financing already subcontract to smaller service providers – DSR could be handled the same way with minimal risk or change to existing working practices.
  • NOVICE is a low risk, way of bringing demand side response skill set to an ESCO immediately, without large investment in training or developing in-house expertise.
  • The ability to provide DSR as well as EE services could reduce contract length and perceived risk which could help alleviate the fears of potential public and private sector clients and kick-start the EPC market in Belgium.
  • The NOVICE model could be presented as a best practice example of a complete EPC to encourage uptake – it doesn’t have to compete with traditional EPC models as these have not yet gained traction in Belgium.
  • Being able to offer EE as well as DSR services by working with an aggregator will give the ESCO a USP.
  • Introductions to aggregator clients that have potential for EE is an easier way to increase revenues for the ESCO than building relationships with new clients

Weaknesses of NOVICE model

  • Could introduce delays in the project since there is a legal obligation for aggregators to seek agreement from BRP and DSO in order to provide DSR services.
  • If the client switches to a new electricity supplier during the EPC, a new agreement is needed with the new BRP which could create difficulties for the EPC.
  • EPCs are already complex. Adding an additional service may make it more difficult to persuade clients to sign up to an EPC.
  • Aggregators and their services are not widely known to potential clients which could make the NOVICE model harder to sell than a traditional EPC.
  • As the ESCO is the client facing contractual service provider the financial and reputational risk associated with underperformance of the aggregator is borne by the ESCO.
  • Added complexity of administration and transaction costs related to managing revenue streams from DSR.
  • Relies on aggregator to accurately estimate potential revenues from DSR. Incorrect assumptions could result in not achieving the guaranteed level of performance

Opportunities for NOVICE model

  • Publicly owned ESCOs act as EPC facilitators and, with the right awareness raising and capacity building, could promote the NOVICE model to clients and private sector ESCOs in Belgium.
  • Belgium plan to significantly reduce their nuclear capacity and increase proportion of renewables on the grid in the coming years which will require an increase in the flexibility of buildings.
  • The premium offered by Network operators to SMEs that implement energy savings could help to incentivise EPCs by making them more financially attractive.
  • A new law that formalises the role of the aggregator and removes the need for agreement from the BRP will make the NOVICE model more attractive for ESCOS.
  • The ESCOs for SMEs programme could be a vehicle for promoting the NOVICE style of EPC and generating best practice case studies.
  • All ESCOs are associated under one umbrella association (Belesco) which could enable lobbying for future legislation and favourable conditions.
  • As there is no legal framework for EPCs, ESCOs could push for one that benefits the implementation of the NOVICE model.

Threats to NOVICE model

  • Lack of examples of successful EPC contracts in public & private sector has led to a low uptake of EPCs in Belgium. There is general mistrust or lack of understanding preventing large scale roll out of EPCs.
  • Public sector clients tend to contract with public sector ESCOs, while private sector clients tend to contract with private sector ESCOs. This makes it difficult for ESCOs to expand into new markets.
  • Regulatory framework for energy is different in each region of Belgium making it difficult for ESCOs to operate nationally.
  • Clients, building owners and FM companies are relatively unaware of the opportunities available in EE and DSR and lack understanding in these areas making it difficult to sell a NOVICE style approach to them.

Strengths of NOVICE model

  • Possible new revenue stream through offering the client DSR plus EE, or acting as a facilitator of EPC contracts.
  • Ability to facilitate the NOVICE approach gives FM company a USP as there are not many EPC facilitators in Belgium.
  • Adding DSR to existing energy related contracts could generate a new revenue stream for FM companies.
  • Working with aggregators FM companies can provide an additional service to clients without need to train new staff or take on new risk.

Weaknesses of NOVICE model

  • The FM Company is the client facing contractual service provider so they bear the additional financial and reputational risk associated with underperformance of the aggregator.
  • The NOVICE model requires a more complex contractual arrangement with the client.
  • Relies on aggregator to accurately estimate potential revenues from DSR. Incorrect assumptions could result in not achieving the guaranteed level of performance.
  • If equipment or services do not meet client expectations FM personnel will be expected to fix the problem, increasing maintenance and repair costs.
  • Additional third party suppliers and additional technical infrastructure on site increases complexity and risk.

Opportunities for NOVICE model

  • Potential new service partnership models offered by EPC and DSR options.
  • EPC is an opportunity for FM provider to perform additional maintenance and repair.
  • Lack of restrictive legislation can help strengthen relationship with clients, since NOVICE model could be adopted by technically strong FM providers as an additional service to clients.

Threats to NOVICE model

  • Periods of high energy price volatility can make it unattractive for clients to enter long-term EPC.
  • In times of political uncertainty, tax credits could be removed with relatively short notice, hindering taking decisions on long-term renovation plans.
  • Publicly owned ESOCs could be dissolved or absorbed by other government departments following a change in government or leadership which introduces uncertainty for client.

Strengths of NOVICE model

  • The NOVICE model results in a second revenue stream for EPCs which reduces the risk of default on a loan.
  • EPCs operated under the NOVICE model have a potentially shorter payback period due to the inclusion of both EE and DSR revenue streams, giving more favourable returns on investment.
  • Diversification of investment portfolio with new actors in the EPC market.
  • NOVICE presents potentially higher value projects with shorter payback periods which are more attractive to investors.

Weaknesses of NOVICE model

  • Revenues from DSR are difficult to predict with certainty which could introduce higher risk.
  • Finance is being provided to an ESCO for equipment that will be outside of their control, which increases the risk of loan default.

Opportunities for NOVICE model

  • Proposed changes in legislation around the status of the aggregator give financiers more confidence that there is government support for NOVICE model contracts.
  • Government commitment to reduce use of nuclear gives more confidence that NOVICE style EPCs are secure investments.
  • Access to premium payments from network operators for investment in energy efficiency measures increases financial viability of projects.

Threats to NOVICE model

  • Few government subsidies available for EPCs making it harder for projects to demonstrate financial viability.
  • Small market size means loans are likely to be offered at non-preferential rates, and can restrict the number of financiers interested in participating.

Strengths of NOVICE model

  • Working with established ESCOs could give access to the public sector clients that already use and trust the EPC model.
  • NOVICE model potentially gives the aggregator access to smaller clients who have traditionally not entered the DSR market due to small returns on investment.
  • Being able to offer EE as well as DSR services by working with an ESCO will give the aggregator a USP.
  • Introductions to ESCO clients that have potential for DSR is an easier way to increase revenues for the aggregator than building relationships with new clients.

Weaknesses of NOVICE model

  • Aggregator does not build a direct relationship with the client.
  • Complexity of contractual arrangements increases when combining with energy efficiency.
  • Revenues are handled by the ESCO which could result in longer payment times for aggregator.
  • EE measures typically reduce the load available for participating in DSR, which reduces revenues for aggregators.

Opportunities for NOVICE model

  • Changes to DSR market will make it easier for new market actors to participate in future.
  • Aggregators that adopt the NOVICE model will be able to access more clients by being able to offer a wider range of services.
  • The Government’s energy efficiency targets could drive more private sector clients towards EPC style contracts. Aggregators that adopt the NOVICE model will be able to access this market.
  • Projected increase in renewable capacity on the grid will create a demand for more DSR services and a more accessible market.
  • Real time data exchange between all market actors via smart meter roll out can facilitate the opening of more markets that are more accessible for smaller clients.

Threats to NOVICE model

  • Until regulations are changed to allow aggregators to contract directly with clients without agreement from BRP, the costs of participation could be too high.
  • New regulatory framework for increased DSR participation may not become open enough for NOVICE or may develop too slowly to enable aggregators to participate in the near future.
  • There is continued focus on client-side energy efficiency improvements and fewer developments on energy source flexibility.

Strengths of NOVICE model

  • NOVICE facilitates access of building owner to subsidies for energy efficiency improvements e.g. tax breaks for energy efficiency equipment
  • For smaller buildings, the NOVICE model might make it more attractive to participate as an energy generator.
  • For larger private self-generators, the NOVICE approach provides a more organized approach to using their surplus energy either offsite or by exporting in response to a DSR event.

Weaknesses of NOVICE model

  • Current nature of EPC limits the use to larger buildings in the public sector.
  • Long-term contracting restricts the client’s ability to respond to changes in the business.

Opportunities for NOVICE model

  • Final consumers will have new options for EE and EPC through an energy supplier that contracts a NOVICE model adopter.
  • Value-added participation in programmes for residential improvements related to EE.
  • Allow participation in government programmes for renewable energy generation.

Threats to NOVICE model

  • Periods of high energy price volatility can make unattractive for clients to enter long-term EPC.
  • In times of political uncertainty, tax credits could be removed with relatively short notice, hindering taking decisions on long-term renovation plans.

Strengths of NOVICE model

  • NOVICE is a low risk way of bringing demand side response skill set to the ESCO but some in-house investment and training are needed to develop the EPC as it is currently a very small offer of the total EE market.
  • Offering DSR as well as EE services will give EPC a USP and a nationwide boost to the EPC as a product.
  • NOVICE model makes EPCs more attractive to private sector clients who favour shorter contract lengths.

Weaknesses of NOVICE model

  • Additional layer of complexity in market contracting, even if regulatory barriers are being modernised which could put off some clients.
  • Contract length may still be too long for the private sector clients.
  • Market for DSR and aggregation is still immature and undergoing change. This could introduce extra administrative costs and could change the likely payments from DSR which introduces risk of underperformance to the ESCO and client.
  • The need for an aggregator to obtain a bilateral contract with the BRP could cause a delay to starting an EPC which could put off clients.

Opportunities for NOVICE model

  • NOVICE is a convenient model for energy suppliers to subcontract a company that will help demonstrate compliance with energy reduction requirements at the transmission and final consumer level.
  • Changes to DSR market will make it easier for new market actors to participate in future. ESCOs that adopt the NOVICE model will be ready for this.
  • The Government’s commitment to 100% renewable electricity by 2030 will create a demand for DSR services. ESCOs that adopt the NOVICE model will be ready for this.
  • Use of grants and subsidies for energy efficiency improvements at the building level allows to reach smaller residential clients.

Threats to NOVICE model

  • Change in state subsidies or energy policies that can be modified or phased out according to political interests.
  • Change in state policies affecting relationship of public building sector (currently the largest client sector for EPC) with ESCOs.
  • Non-uniform practices across regions can affect the overall national offering, lowering growth.

Strengths of NOVICE model

  • Working with aggregators FM companies can provide an additional service to clients without need to train new staff or take on new risk.

Weaknesses of NOVICE model

  • Additional third party suppliers and additional technical infrastructure on site increases complexity and risk.
  • The NOVICE model requires a more complex contractual arrangement with the client.

Opportunities for NOVICE model

  • Potential new service partnership models offered by EPC and DSR options.
  • Potential to increase client base.

Threats to NOVICE model

  • Periods of high energy price volatility can make unattractive for clients to enter long-term EPC.
  • In times of political uncertainty, tax credits could be removed with relatively short notice, hindering taking decisions on long-term renovation plans.

Strengths of NOVICE model

  • Market is well-regulated and relatively stable which strengthens case for finance of NOVICE adopters.
  • The NOVICE model results in a second revenue stream for EPCs which reduces the risk of default on a loan.
  • Diversification of investment portfolio with new actors in the EPC market.
  • Access to government subsidies and tax breaks strengthens the ROI and reduces the risk to investors.

Weaknesses of NOVICE model

  • DSR financing not attractive as few aggregators can participate under current regulations.
  • Revenues from DSR are difficult to predict with certainty which could introduce higher risk.

Opportunities for NOVICE model

  • Schemes such as the housing renovation bank can be offered in a more substantial manner to more clients by using the NOVICE model.

Threats to NOVICE model

  • Financial default by parties who cannot meet specific terms of the EPC due to distorted risk assessment, sharp changes in energy prices, or weather occurrences that influence energy production and savings estimations.
  • High complexity in contracting can restrain the amount of profit to be made from financing.