Energy contracting: how much can it contribute to energy efficiency in the residential sector?

Panel: Panel 4. Residential and commercial sectors: delivering lower energy use in buildings

Authors:
Jan W. Bleyl-Androschin, IEA DSM Task XVI “Competitive Energy Services“, c/o Graz Energy Agency Ltd, Austria
and Energetic Solutions, Austria
Friedrich Seefeldt, Prognos AG, Germany
Friedrich.Seefeldt@prognos.com
Bernd Eikmeier, Bremer Energie Institut, Germany

Abstract

Energy use for space heating and warm water in residential buildings accounts for more than a quarter of the final energy consumed in Germany. Yet, energy efficiency (EE) is not a priority for most building owners. At the same time Energy Contracting (EC) has climbed high on political agendas and has even reached the headlines of EE-legislation (2006/32/EC). But the realistic potential, the limits and obstacles of ESCo products in the residential sector are not well enough understood yet, as some political statements and the limited market success tell us.

Answers to these questions are thought in the framework of an ongoing research study for the German government. We have undertaken a conceptual analysis of Energy Supply Contracting (ESC) as the market prevailing product. And an economic analysis of transaction cost and a life cycle cost comparison between in-house and ESCo implementation. The results are compared with the empirical data of a comprehensive market query. We also studied statistical housing data to estimate suitable ESCo market potentials in the residential sector.

Over the range 30-1,000 kW _th installations, the life cycle cost comparison reveals no significant cost advantage for ESCo compared to in-house projects. We found a cost effective minimum project size of 100 kW _th for ESC-projects, derived from transaction cost accrued to implement ESC projects. This figure is confirmed by the market query.

The market query has further revealed around 250 ESCos, whose dominant product in the residential sector is Energy Supply Contracting. Based on their specialized know how, competent ESCos achieve an average efficiency gain of around 5%. They are more likely to implement innovative and renewable technologies. Although there is still a lack of market data, it can be implicitly derived from other market data and results of our query that the actual market coverage for ESC in the residential sector is between 10 and 20%.

In the German residential sector, a market potential of 12.3 TWh/a is considered "preferentially suitable" for ESC: This accounts for only 5.6% of the total statistical demand. An additional, "conditionally suitable" potential amounts to 102.0 TWh/a, mainly limited by small size of the buildings.

We conclude that the EC market potential for the residential sector is confined by two major restrictions:

Due to transaction costs ESC is restricted to projects > 100 kW _th in the residential sector.
With ESC as the prevailing product in the residential sector, efficiency gains are restricted to the boiler room and thus limited to around 20% compared to existing or 5% compared to new in-house installations.

We recommend EC product standardization to access the "conditionally suitable" market. Additional efficiency potentials of 20-50% can only be tapped, with comprehensive building technologies, building envelope and user behaviour approaches. And if EC product features are perceived as added values to its customers.