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Energy Services Companies

Online since 5.11.2015 • Filed under Advertorial • From Issue 16 page(s) 182-183
Energy Services Companies

In his personal capacity, Karel Steyn, president of the southern Africa Energy Efficiency Association argues the case for the revival of the ESCO industry.

Is the solution to South Africa’s energy problems in the revival of the ESCO Industry? In this article, the importance of good Energy Services Companies (ESCOs) to assist businesses to address excessive energy use or wastage are considered. If these issues can be addressed they will also deal with South Africa’s energy challenges. However, before dealing with the ESCO issue, this statement needs clarification as to why dealing with energy efficiency will address the energy predicaments we are currently experiencing and, at the same time, the issue of climate change. The impression is that renewable energies are the only solutions that could tackle the climate change dilemma. However, research commissioned a few years ago by the International Energy Agency (IEA) found that the opportunity for energy efficiency, and therefore carbon related emissions, is double that of any other energy management measure. The following well-known figure from the IEA report on climate change impacts refers:

Consider that South Africa began its energy efficiency efforts 30 years later than the developed world, which means that much action must take place to get the country fully energy efficient. The fact  is that ample opportunities for energy efficiency exist in South Africa. ESCOs are the companies that have the necessary resources to identify, propose and possibly implement energy efficiency measures, to save energy and, therefore, also money for consumers. These resources would typically include at least energy auditing, solution identification, proposal development and project management skills. The problem is that the ESCO industry never developed into its full potential and exists on a limited basis in South Africa. An independent benchmarking study during 2014, funded by the International Finance Corporation, found that not even a handful of ESCOs could be deemed world class, with the most active in this field only being installers of energy-efficient equipment. Trained and experienced resources are therefore an absolute necessity towards being an ESCO that can successfully identify and implement energy efficiency solutions.

ESCOs – a look ahead

However, all companies, including ESCOs in South Africa, now face dealing with the requirements of the revised Broad-Based Black Economic Empowerment (B-BBEE) Codes of Good Practice. This effectively means a new beginning in the re-orientation of the transformation policy to focus more on productive B-BBEE and the growth of black entrepreneurs – in the words of Minister Rob Davies. To my thinking, this simply means developing individuals to grow and become more productive. In the context of the ESCO industry this could probably take effect in many ways, such as partnerships or joint ventures between knowledgeable and successful ESCOs with new or inexperienced entrants with good B-BBEE rating levels. An acceptable B-BBEE rating should translate into easier access to funding from almost any source, organisation or sphere of government. This does not mean that one ESCO or partner should do absolutely everything while the other ESCO or partner only shares in the benefits with no effort. No, to the contrary, both should be working together towards making the business more successful. There are rules about having good partnerships or joint ventures and the industry needs to accept and work towards these. Yes, it may often be quicker and easier for the experienced ESCO to do everything, but the reality is  that the solutions lie in really sharing knowledge and skills towards successful bidding and implementing projects in return for a portion of the profits it brings about. Note: this approach has no place for the so-called tenderpreneurs or those who only want to benefit without contributing. Experienced and successful ESCOs, corporates, and most businesses need to carefully consider the repercussions of the revised policy and nonadherence to it. Furthermore, the huge amounts of funding available for energy efficiency in South Africa cannot be unlocked by those ESCOs who are experienced and successful but lack a very good B-BBEE rating. These ESCOs need to join forces with those who have the B-BBEE rating and who can get easier access to the funding. After all, a business’s goal is to survive or ultimately be sold at a huge profit. None of this would be possible without the appropriate partners, business model and B-BBEE ratings. Opportunity is knocking!  Businesses need competent ESCOs and most require the appointment of good B-BBEE-rated companies. Some have the expertise and some have the ratings, while others have the opportunity. The funding is available. Is it then not obvious to work together? It is time that the South African ESCO industry (not only the handful), and those willing and interested to learn and work, should come forward and mobilise to take their rightful places and help unlock the billions available for the implementation of energy efficiency on a huge scale and, in the process, deal with many of the country’s challenges, including, but not limited to, energy. The SAEE is looking into arranging an ESCO workshop to address these issues and opportunities, and to get the industry organised. SAEE already has one sponsor but needs more to make this happen. I call upon all players in this industry to make a contribution.

About the author

Mr JJ (Karel) Steyn, Pr Tech(Eng), Pr Techni(Eng), C.E.M. and C.M.V.P. is a senior consultant on

energy performance verification with Eskom. Previously, he managed the Measurement and

Verification (M&V) function for eight years. Since 1992, Karel has been active in many capacities in

the fields of energy and climate change.

Editor’s note: Mr Steyn points out that the opinions expressed in this article are his and do not necessarily reflect the opinions of the SAEE board, its members, or any other organisation
Issue 16

Issue 16

November 2015

This article was featured on page 182-183 of
To Build Magazine Issue 16.

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