LPD exempt

The Hong Kong Building Energy Code version 2012 rev1 and 2015 Lighting Power Density (LPD) requirement does NOT apply where the room lighting load does not exceed 100 watt (2012 rev1 page 13) and 70 watt  (2015 page 14) respectively.

2015-lpd 2012-lpd

by implication the target is the TOTAL power (lighting and control gear).  So what does that mean? for BEC 2015, it means a store room with total power is less than 70w you are not required to comply with the 9w/sqm LPD or the lighting control requirement.

— John A. Herbert

Alternate EE models

Energy Efficiency might well be the fastest, least intrusive and lowest cost solution to implement energy conservation projects that also lowers your carbon footprint, the McKinsey report even highlights these opportunities. However, it does not take way from the fact that little improvements have been made.

This report dated March 2009 covers much of the same ground, only offering legislative improvements to encourage take up of energy services.

John Herbert
Kelcroft E&M Limited
helping lower the cost and impact of doing business in Asia

International Energy Efficiency Finance Protocol

Hope on the horizon for ESCO’s and Energy efficiency projects? EVO has released (April 2009) a new publication (cover see right) titled International Energy Efficiency Financing Protocol or IEEFP to tackle the issue of bank training.

This guide is based on work conducted by EVO in Mexico, and Thailand is targeted at your local financing institution, primarily banks, essentially helping them to understand and evaluate energy efficiency project finance risk.

As mentioned here ESCO’s historically suffer from a  weak balance sheet, and often find difficultly finance for viable energy projects, one of the reasons most often cited being Financial Institutions lend only based on collateral.

Considering the financial chaos gripping the US, perhaps that prudence should have been extended across all sectors of banks activities?  Anyway, the present approach, demanding asset based collateral, overlooks the benefits of energy efficiency improvement projects, including the income stream from lower energy costs and to some extent lack of understand the mechanics of energy efficiency programmes.

This guide aims to show financial institutions how energy projects that generate energy savings, result in cash flow revenue, and can increase credit capacity for repayment of loans. It is comprehensive overview including a plan for a two day training programme, what expected risks strategies from new and emerging technologies one might encounter.

Unlike the Hong Kong’s recently launched Buildings energy funds it clearly states the obvious, the need for Investment grade energy audits and M&V (Measurement and Verification) to ensure that projects are sound and that projected energy savings are sustainable.

Risk is always an issue, especially for banks entering new territory, recognizing the outstanding opportunities and potential benefits multinational financial institutions (MNF) such as IFC created a programme for help manage the credit risk, for example this publication cites the experience from using IFC/GEF Commercializing Energy Efficiency Finance (“CEEF”) programme.  Locally, we already have IFC’s CHUEE programme which is entirely focused on China energy efficiency projects.

I agree that education, and edcuating the banking sector as a whole, not one person at a time, is a critical issue for wider adoption of energy efficiency improvement projects.  So will this guide answer all of your questions? Unfortunately no, as stated in the preface, it only provides a framework, it is intended as a starting point for a series of further IEEFP programmes and a perhaps a teaser for their two day training course.

Overall yes it is a useful energy efficiency primer, IEEFP 101. It does provide the bare bones of a programme, however key points are only covered with a list of bullet points and likely to leave the reader equally unsatisfied.

John Herbert
Kelcroft E&M Limited
helping lower the cost and impact of doing business in Asia

Business as usual is not an option

I rarely follow the advice of so called “business gurus”, perhaps I should. But I do read Seth Godin’s blog. If you have never heard of Seth, he is the author of several best selling business books in the USA. And he still inspires me today. He recently remarked on this blog that to grow a business you need three elements:

1. A group of possible customers you can identify and reach
2. A group with a problem they want to solve using your solution
3. A group with the desire and ability to spend money to solve that problem

Item 3 is particularly interesting for energy professionals – How can the energy industry persuade new customers to part with their hard earned money to lower their operating costs and lower their carbon footprint.

Potential customers offer a range of reasons not to buy, ranging from the obvious to to the sublime, and the often cited cost is just one obstacle. I sure this is a question is vexing the minds of many. Perhaps the energy industry should offer more guarantees – a cost saving guarantee, using the Energy Performance Contracting (EPC) model.  However, an EPC is not a silver bullet solution, it is not for everyone, and some facilities can’t take advantage of EPC’s due to the high transaction cost.

As living standards here in Asia has increased, the demand for electricity has sky rocketed, mainly generated by from coal burning, with areas of south China and PRD region consistently suffered power shortages over the last few years is evidence of that.  However, it is often difficult to gain sufficient traction for big issues let me give you an example, a recent report stated that many emanate financial experts predicted the financial crisis but the problem was too hard for government to take preventative action, same applies to climate change. It is hard for organisations to deal with big issues period.

I think energy professionals need to help, we need to help advise and educate businesses, and stakeholders to create a demand before thinking about the sale.

Financing Energy Efficiency is EPC the answer?

While everyone seems to be pointing to the financial crisis I can see more opportunities to use creative financing techniques, like the Energy Performance Contract model to finance energy efficiency improvement projects.

An Energy Performance Contract (EPC) is a tried and tested method to fund capital expenditure for an energy efficiency improvement project from the future cost savings. First, let me say this is not a new idea, energy performance contracting has been around for decades, and today is probably the best option around where budgets are tight. Typically an EPC covers the entire project cost, including all the new equipment, cost of finance, measurement and verification, and maintenance all funded from the energy savings.

I was asked today is an EPC only suitable for replacing old and ageing equipment? Typically my answer would be yes, that is a good application because large energy efficiency improvements equate to significantly lower operating expenses.  However, here in Hong Kong, there is also the option for healthy air cooled chillers can be replaced today with water-cooled chillers under an EPC so facility owners can immediately enjoy the benefit of lower operating costs.

Energy efficiency improvements achieve cost reductions by improving facilities, for example a more efficient air conditioning system, but also create soft benefits too including lower maintenance costs and improved comfort for the building occupants. Facility owners have the new equipment installed so the risk to the owner is minimal, yet there is an overwhelming inertia for EPC’s to traction in this part of the world. The objections to be honest are not clearly defined.

Also an often overlooked benefit is the value gained by combining multiple technologies and payback periods, to achieve an overall package which will meet the project cash flow projections. EPC Projects are typically 3-5 years in length, although government bodies have been known to enter into lengthy contracts.

Nowadays, with the software and analysis tools available, EPC’s often include more complex systems such as central plant distribution loop modifications. These more complex upgrades could include plate and frame heat exchangers, variable frequency pumping, and controls.  Some contracts even include other sectors, such as water, grey water, and waste treatment.

There are seven model Energy Performance Contracts types, and clearly these will continue to evolve. In the current economic climate they might even reach critical mass.

John Herbert
Kelcroft E&M Limited

helping lower the cost and impact of doing business in Asia