Overview of activities

Introduction | Awareness development of public building owners | Trainings |Training of ESCOs | Training of professionals | Assessment of the trainings | Transaction support | Assessment of the ESCO Transaction Support Fund

• training of ESCOs
• training of professionals, so that project development capacities on the market get better
• transaction support for project development, and for implementation of ESCO projects· awareness development of public building owners
• co-operation with other energy efficiency initiatives in Hungary
• dissemination of information and communication by the help of newsletters and a Hungarian website

Awareness development of public building owners

Based on the analysis of the non-residential market, ELI-Hungary sought out upgrading the lighting systems of existing public buildings. Developing the awareness of building owners (municipalities, counties, the "state" represented by its ministries, state owned organizations and companies, churches and other houses of worship, associations of public owners, NGO's as building owners, etc.) was a priority program.

Energy audits performed in public buildings confirmed that there is a fair scope for electricity conservation (even when the existing technology is based on fluorescent lamps). Unfortunately, the energy cost savings resulting from upgrades rarely justifies the investments. The payback times, if only the energy conservation effect is considered, are typically in excess of eight years. It is necessary that in addition to energy conservation effects, the visual comfort improvements and lifetime extension be taken into account, too.

The owners of the public buildings were approached, within the scope of ELI’s awareness development program, by an optimum mix of the following information channels:

• preparation and distribution of printed materials,
• information supply through existing specialized communication channels (periodicals for municipalities and hospitals, internal communication within large state-owned companies, etc.),
• the public media,
• events.

The awareness development program of ELI-Hungary hadthree phases.

(i) In the introductory phase the idea of efficient lighting was presented for the target audience and attention was generated to the following phases’ activities.

Information was disseminated about the importance of efficient lighting in public buildings, and news were spread about a forthcoming major event, the Lighting Day. More than 3500 decision makers were approached and invited to the Lighting Day. The invitation packages contained a booklet on efficient lighting.

(ii) The Lighting Day – conference and lighting exhibition - was organized at the Budapest Convention Center, on November 12 2001. There were lectures on the importance of energy efficiency (Ministry of Economic Affairs, Ministry of Interior), technical possibilities (Hungarian Lighting Society), government programs (Energy Centre), health effects (Technical University), financing (independent expert and IFC-Hungary), ELI initiatives (EGI), lighting design (Hungarian Lighting Society) and an exhibition was also held with all the major equipment suppliers present.

More than 500 people registered themselves at the event excluding the exhibitors, the lecturers, the organisers, etc.

(iii) In the third phase the public building owners worked directly with the market players introduced during the Lighting Day and shown in the ELI database. Their project development activities were supported by ELI's ESCO TSF. The ELI Program, in co-operation with the HLS, runs a general phone advice service to help the end-user institutes to solve everyday and long-term problems, to establish contact between them and the ELI certified professionals and ESCOs.

Also, a newsletter was issued eight times and was disseminated amongst the public building owners, as a reminder of the importance of lighting upgrades. The newsletters presented lighting/financing products, gave availabilities of market players, and published good news stories. They also reminded the readers about assistance that ELI had made available.

• Lighting entrepreneurs (installation companies, contractors, project developers) with experience in both lighting technology and making business, who, however, have not – or just a limited extent – worked as ESCOs up to that point.
• Agents, representatives of major equipment suppliers, with professional knowledge about the lighting technology, and possible experience in project development. However, they have not acted as ESCOs till then.
• General electric/HVAC entrepreneurs (installation companies, contractors), who intend to expand the scope of their activities to include indoor lighting and/or ESCO type of work.· Companies with general ESCO experience (existing ESCOs), who intend to include indoor lighting into their scope of activity.
• Lighting professionals (design engineers, experts, etc.) who excel in lighting technologies and would like to become businessmen.
• Electric utilities which would like to use lighting upgrade projects for customer retention purposes.

The training itself took place between September 20th and November 14th 2001. Altogether 43 trainees from 28 companies attended the course. At the conclusion of the training an exam was held. 34 trainees of 21 companies passed this exam successfully. The names of those who obtained an ELI ESCO Training Certificate, were put into a database which has been made available for a wide scope of potential project owners on the ELI website.

Training of professionals

The "Training of Professionals" program was planned to develop the knowledge of design engineers and lighting experts about efficient technologies. By training the engineers ELI-Hungary expected to have them apply efficient lighting solutions in their design practice more often.

While engineers may not be involved in smaller lighting projects, in the case of major ones, the involvement of lighting engineers is unavoidable. Energy efficiency or minimization of lifetime costs is rarely included in the scope of expectations. Illumination levels and investment costs have high priorities. The specification of luminaries, for example, is largely influenced by the individual design engineer's professional background.

The main target group of the training program is the group of – ca. 500 – engineers with a so-called "0.4 kV license" who are supposed to work on major lighting projects. Unfortunately most of them have never received lighting education or just very limited extent. Mostly they have learnt via their own experience, and as a result, many of them have gained good knowledge of energy efficiency lighting. The target group was extended by decision makers of the technical departments at public institutes.

The professional training was held between September 24 and November 22, 2001. The courses were held in 4 different settlements all over Hungary. The number of attendees reached 159, out of which 135 received an ELI certificate following the successful final exam and preparation of the test script.

• improve the availability of expertise on the market,
• improve the knowledge of the practicing design engineers,
• improve the clients’ knowledge and demand towards cost effective lighting solution of which the proper lighting conditions can be assured,
• generate a workforce - both the client’s and the professional’s side - that is keen to assist development of lighting projects .

• the development of ESCO lighting projects - to overcome the high transaction cost barrier,
• the marketing of ESCO lighting projects - to overcome the low awareness barrier,
• the development of mainstream ESCO and ESCO-support complementary - financial, legal, technical, administrative – capacities – to overcome the insufficient capacity barrier,
• the implementation of model transactions – to demonstrate the benefits of the ESCO approach, and to demonstrate the feasibility of state-of-the-art efficiency technologies,
• the preparation of sample ESCO contracts, and
• the development of end-user capacities to procure ESCO projects – to lessen suspiciousness about the ESCO approach.

• High up-front project development costs. The development of ESCO projects, preparing them for investment, getting end-users ready to make decisions, developing and providing appropriate enhancements to create creditworthy finance structures, and arranging financing, is rather expensive and risky. The development costs are high as compared to the value of the project. The ESCO cannot be sure that the costs can be recovered later, as the end-user may select a different implementation model or a different entrepreneur. High up-front costs and risks hinder the development of projects in general, and keep the ESCOs away from smaller projects.
  
• Suspiciousness about the ESCO approach. There is not good understanding of what an “ESCO” or an “ESCO project” is on the market. News spreads about extra high entrepreneurial profits, poor performances, and difficult-to-follow business models. The end-users are more distrustful and suspicious than the ESCOs would deserve.
  
• Low quality products used in retrofits. Quality is often neglected in lighting upgrade projects. The end-users’ efforts to keep first costs low may result in the use of extremely low quality equipment. Luminaires for linear fluorescent lamps are available already for USD 20 (cc. HUF 4,000), while a fair quality one cost 2.5 times more. Therefore the end-users who opt for such cheap (as the decisions are based typically on the first time costs) products become unhappy sooner or later and the news on unsuccessful projects spread on the quickly market.
  
• State-of-the art technologies neglected. State-of-the art technologies, such as electronic ballasts or sophisticated lighting controls are in most cases neglected because of the perception that they are “exotic”, not worthwhile to buy.
  
• Not enough good news stories about ESCO projects in the indoor lighting market. Although the ESCO approach is widely known in Hungary, most of the end-users believe that it is applicable mainly for large space/district heating and street lighting projects only. Not many indoor lighting projects are implemented by ESCOs, and news about the successful ones is not spread properly.

The Fund had two windows:

• The “Project Development Window” covers a part of the “soft” transaction costs of the applicants, and
• the “Demonstration Window” covers a part of the “hard” investment costs of projects with outstanding demonstrative value.

The Fund provided support on a competitive basis. The scope of eligible applicants included:

• operational ESCOs which were working on new project(s)· companies which were willing to enter the ESCO market (“to be ESCOs”), and were working on new ESCO project(s)
• end-users who were considering involving an ESCO for the modernization of their lighting equipment
• ESCOs or to be ESCOs which were marketing their services
• ESCOs or to be ESCOs which were developing their capacities (for example need expert assistance, special training, information exchange with other market players, etc.)
• experts, entrepreneurs, etc. who are developing or marketing products, services for ESCOs (e.g. project evaluation software, market survey, marketing tools, etc.).

The scope of eligible activities, services, and products included

• energy audits at potential ESCO clients
• preparation of ESCO proposals for end-users· development of business models, financing schemes, sample contracts, etc. for ESCOs
• procurement and management of ESCO projects by the end-users
• marketing activities of ESCOs
• technical design and engineering of interventions belonging into the scope of an ESCO project
• expert assistance to lighting ESCOs
• demonstration of novel applications of energy efficient lighting technologies in compliance with ELI technical standards· demonstration of ESCO business models
• demonstration of novel indoor lighting upgrade market segments· development of sample ESCO contracts.

The call for application was available and downloadable from the ELI website. Also, the ESCO TSF was advertised or announced on the ELI trainings, at the Lightings Day (see later), in the ELI Newsletter (see later), and on diverse occasions when the potential applicants were present (workshops, seminars, conferences, etc.). The office routine (evaluation of the applications, contracting, and submittal of project development report / execution of the implementation of the demonstration project) also included professional evaluation of the elaborated and implemented projects. In this manner the performed works had to meet the ELI technical requirements, which were checked by the professional advisors of the ELI Program.

Assessment of the ESCO Transaction Support Fund

The two windows served the same purpose. However, the timing, and operational practices of the two windows differed. Support from the Project Development Window was available for 42 projects, while only 5 carefully selected projects received support from the Demonstration Window. Operation of the Project Development Window started in late 2001, while the support from the Demonstration Window was made available from mid 2002. The ESCO TSF was closed at the end of May 2003

	Training of ESCOS The objective of this program was to catalyze the establishment of new lighting ESCOs. This program used flexible training methods which included distance learning, individual tuition, and e mail consultancy. Main topics: A general introduction to the Hungarian energy field, the ELI program, introduction to indoor lighting concepts, indoor lighting upgrades, ESCO business, project development issues, allies and competitors. (12 kb)
	Training of professionals, so that project development capacities on the market get better This program trains engineers and lighting experts about efficient technologies. Main topics: Introduction (energy-efficient lighting technologies), lamps, lamp control gears, luminaires, planning efficient lighting, electrical calculations and installation, good maintenance for efficient and environment friendly operation, special cases, economic aspects. (16 kb)
	Transaction support for project development, and for implementation of ESCO projects The objective is to assist ESCOs and buyers of ESCO services in overcoming barriers to ESCO business development. These barriers include: High up-front project development costs, lack of confidence in the ESCO aprroach, low-quality products used in retrofits, state-of the- art technologies neglected, not enough good news stories about ESCO projects. (28 kb)
	Assistance to financial institutions to develop financing products for investments in internal lighting upgrades. (8 kb)
	Awareness development of public building owners. This program has three phases: introduction, the lighting day and generation of a pipeline is based on the analysis of non residential sectors. Dissemination is done through: printed materials, periodicals of municipalities, hospitals, public media, events. (108 kb)
	Cooperation with other energy efficiency initiatives in Hungary (8 kb)
	Information supply and communication by the help of the local language website (8 kb)

To help better understand ELI's strategy, a summary is given on options of financing lighting upgrades in the non residential sector

Financing lighting upgrades in the non-residential sector Different ways of financing: own funds, own funds plus commercial loan, soft loan, financing arranged by an ESCO, financing provided by an ESCO. (12 kb)