The EVO Blog

Nathan Shetterley

News and Information about energy efficiency, measurement and verification, sustainability and all things green. Specifically IPMVP and IEEFP!

Episodes

  1. 08/07/2009

    EVO Insights Episode 3 with Thomas Dreessen

    Episode 3 of EVO Insights is an interview that I've wanted to do for a long time. Earlier this week globe trotter Thomas Dreessen and I got to chat about the recently released IEEFP (the International Energy Efficiency Financing Protocol). This is a protocol that has been in the works for a long time and I got to learn a little about its history and about Thomas' hopes for it. Click here  to listen to the show right in your browser or click here to download the episode. Episode 3 Transcription Nathan: Welcome to EVO Insights, episode three. Today we will get a chance to hear from Thomas  Dreessen and learn a little bit more about IEEFP, the newly released International Energy Efficiency Financing Protocol from EVO. We’ll learn a little bit about its history, how it got started and what we are hoping the effects will be around the globe. Hope that you enjoy and remember to check in and give us any feedback that you have at evo-blog.com or evo-world.org. Thanks a lot. Nathan: Hey everybody. Today we have Thomas Dreessen with us who was one of the main people behind the International Energy Efficiency Financing Protocol, the new protocol that was published by EVO this year. Tom how are you doing? Where are you at this morning? Tom: I’m outside of the US, down in the Caribbean, trying to relax a little bit in the middle of me closing a big energy efficiency equity fund in China which I anticipate closing in the next 60 days. Nathan: Oh great, so even in the Caribbean working in China [laughs] the world has gotten small. Tom: Correct. Nathan: Thomas, tell us a little bit about how you got started in energy efficiency and how you ended up at EVO. Tom: I’m one of the founding ESCO members in the U.S. I formed an energy services company back in the early 1980’s when the U.S. industry was just getting started and I came from a financial background. As you may know, the ESCO business model is set up to where the ESCO puts up all of the capital. It goes in the large buildings and industrial sites and puts up all of the capital, has to arrange all the capital and get paid from savings so it’s a very capital intensive process to raise the capital on an on-going basis to implement the business model. I got started in that back in the early 80’s and ended up forming ten ESCO’s in ten different countries and developed projects in 24 countries. When I was doing this, I was the CEO and the financial guy structuring all of the project plans. It became clear to me that the only real cost effective way to fund energy efficiency projects was to bring in and try to get the local banks engaged in providing funding. Otherwise the cost to capital was just way too high to do it on a totally equity basis. Based on that, I started back in the early 2000’s trying to come up with a mechanism of how to bring the local banks into the funding and financing of energy efficiency projects. It became clear to me when I went into all of these different countries that there were common methodologies, common ways for efficiency projects to be evaluated and to be funded. It was also clear to me that the banks had essentially had very little knowledge or capacity on how to evaluate and how to look at finding projects which is really what was the foundation for me to really initiate the idea of an international energy efficiency financial protocol. I did this back in July 2004. The U.N. foundation’s energy future collation sponsored a state quarter workshop in D.C. which represented a broad group of experts in energy efficiency finance and the primary focus was to discuss the barriers to increase use of funds for energy efficiency projects. I threw out this idea of an energy efficiency international financing protocol and they agreed that the local banks clearly lacked guidance and expertise in order to lend money to it and this was a good program, if you will, to start setting up around the world. That was the actual genesis of the IEEFP. Nathan: Sounds like a great match with EVO. I know one of the more complicated things, working in kind of the ESCO and measuring and verification world myself, is trying to explain how you can evaluate the value of an energy efficiency project where basically you are selling a reduction in usage of a service. It’s not exactly the most straight forward analysis. Going through IPMVP, I think that it was a great way to get people to understand the value that want to do a project, but wanting to do it and convincing a banker to do it are totally different things. How did you end up with EVO? I know that the… Tom: Well, one of the gentlemen on the Energy Futures Coalition was Henri-Claude Bailly who was on the board of EVO at the time. Of course at the time the name was not EVO but IPMVP, Inc. prior to it changing the name and he was a board member. I suggested to him that this might be a good extension of IPMVP because it's a protocol and it's really geared toward establishing common methodologies and terminologies for bankers to use today with projects. He agreed and suggested I join the board, which I did. That goes back maybe five six years ago, I guess in that range, in that timeline. That's how I got to the board and the idea of the IEFP being an extension of IPMVP. That's the timing and how it came into fruition. Nathan: That great, and then after that it must have been a long time in coming. This started a number of years ago. How did things move forward? What happened? Tom: In addition to this protocol, one of the key elements of it was a conclusion I came up with because I saw it and many people agreed. That conclusion is that there are already a number of documents, materials, and other tools that are active in the marketplace but they are disseminated in a fragmented basis. One of the key objectives of this IEEFP was to create some sort of repository to collect in one place all these common methodologies, documents, and materials to eliminate replication of them being developed in multiple markets. We use that as a basis and the development of an IEEFP in a couple of markets. Actually, I put together on behalf of EVO, a proposal to APEC, the Asian Pacific Energy, I believe it's Energy, Coalition and got some initial seed funding to develop it in 2 of their APEC member countries, which were Thailand and Mexico. The outcome of that was that we developed some Best practices for ports. I formed 2 local teams who did Best practices reports on what is going on currently in those 2 countries related to banks, financing, energy efficiency projects. Also developing a business plan for developing a financing protocol, which the ultimate thing ended up being an absolute training program for local banks that could be put within one of their nonprofit, or one of their governmental agencies, and could be used as a training program in a cost effective way to train bankers and create capacity on how to evaluate and finance energy efficiency projects. So we developed those 2 business plans and then I had to go out and try to get funding for both of those countries, and I was only successful in really getting funding for Mexico. I got funding from a couple of sources. One of them was the U.K. Global Opportunity Fund. It provided substantial funding for us to complete the IEEFP bank training program in Mexico. That's what we did. We actually conducted and created that training program. We had a pilot and 2 training sessions and trained some 6 or 7 financial institutions, some seventeen to twenty people. It was extremely well received. Now we're trying to find a home for it. An agency within Mexico that will use that, promote it, and use it to train under EVO’s agents, trained new bank officers and it's geared toward the lending officers. It's not a program geared toward presidents, or high levels. It's a grass roots training program going through case studies and really detailed explanations of the various technologies in how projects are used to generate new cash flow for their end use host. That's really what the IEEFP is geared toward. It's geared toward how savings are generated and how savings can be used as new credit capacity for the host owners as a basis for repaying the loans. That's been one of the biggest gaps in the marketplace, energy efficiency projects really have no hard asset value. You replace a chiller or a boiler, the residual value is virtually nothing on the hardware or equipment that's installed, because you have lots of costs in replacing the old system. Then again, if anybody knows what is the value of a used value once it's installed in a building, you know it's very little. The real true asset value in an energy efficiency project is the cash flow stream. So, the ultimate goal of the IEEFP is to get bankers to acknowledge and recognize that cash flow stream, and have it start to become the basis for them financing the project as opposed to their traditional methodology which would have it all collateral based. That's a huge barrier for them being able to provide any financing to energy efficiency projects. Nathan: In general, in New Mexico obviously, you've had some success. Around the world,iIs that something that bankers are able to take up and shift their traditional way of thinking and looking at capital, and look at this more cash flow based system. Have you had any resistance? Tom: I think everybody's interested. The bankers are generally very interested because of the focus now. Green energy and energy efficiency, as most people know, is now being counted as the major solution for CO2 reductions. So, it's become a real environmentally friendly and hot item en vogue energy efficiency. So, the bankers are generally very receptive to it. Nathan: McKinsey just released a report yesterday; I think they said America could save 1.2 trillion  dollars before 2020. But, the capit

  2. 08/06/2009

    EVO Insights Episode 2 with Steve Kromer

    For episode 2 of EVO Insights I had a chance to catch up with Steve Kromer and learn a bit more about the Alliance to Save Energy and the recent EE Global conference in Paris, France. Click here to  listen to the show right in your browser or click here to download the episode. Episode 2 Transcription Nathan: Welcome to EVO Insights Episode 2. I'm Nathan Shetterley, and today we'll listen in on an update from Steve Kromer on how the Alliance to Save Energy and EVO are spreading the word about M&V and IPMVP earlier this summer. Nathan: Today we have with us Steve Kromer, who was recently at the EE Global Conference in Paris. Steve, how about you give a little introduction about yourself, and who you are, and why you were in Paris, and then we'll go from there. Steve: Yeah hi Nathan, I'm Steve, Steve Kromer, and I'm in Berkeley, California now. Last week I was in Paris at EE Global. Alliance to Save Energy has recently - they hosted the show there in Paris, and they've begun to emphasize more the evaluation measurement and verification aspect of energy efficiency and along with tracking national efforts in the US to standardize EM&V, they're looking at standardizing international EM&V. And so they hosted a workshop on Monday, and I got to present a couple different times, some on the history of IPMVP, and recent conditions in California. Nathan: Great. And who was at this EE Global conference besides yourself kind of representing IPMVP? What kind of people were there? Steve: So John Cowan also presented at the workshop on Monday. We had a board meeting on Thursday, so along the way just about every board member was somewhere around there, I think. In particular, Alain Streicher and Satish Kumar came in later in the day to the workshop. Nathan: And without giving your whole conference, when you touched on the history of IPMVP, can you give us a little synopsis of what we all missed, staying over here in the States or wherever our listeners may be, but not in Paris? Steve: Well, I guess to a lot of people in this workshop, I guess totally there was probably 50 people towards the end. It seemed like over the course of the day, most of the day long, it filled up. And I guess maybe half the people had heard about IPMVP before, or I don't know, I'm guessing. And there's been a lot of effort in the EU in the last ten years to do similar work on M&V protocols and evaluation protocols under a whole different political structure. But our old friend Paolo Bertoldi was there, and others who have been familiar with IPMVP all along. And I think - I was particularly encouraged by the fact that there seemed to be a consensus that EVO in particular could be an organization to help move things ahead generally, and that IPMVP was still a good starting framework from which to build around to do a more evaluation-type work and standardized evaluation work. Nathan: And how was the reception on that? I know that from my personal experience in Canada, working in Quebec, starting with IPMVP and translating it was kind of the first step. And then - I don't know if the Parisians are going to be able to read the Quebecois French, they kind of make fun of us for that - but besides that, that was a really good first step to moving towards getting kind of a regional protocol out there. How did you feel the response in Paris? Steve: Well, in particular - not so much at the workshop, though I'm not remembering exactly how much of this was discussed there - we met with our new board member from Schneider Electric, Patrick Jullian, and we got a full dose of the recent events in the last year or two of how they've been working to introduce IPMVP in French in France. And particularly for the back story and politics around forming a club, and getting general agreement to support one protocol, and then picking IPMVP, and then doing a translation. Now having a plan to using… …to help circulate it and promote it across the country with the same purpose we've done it all along - just finding one standard way of doing this kind of business. So I think that was really encouraging, that in France they've written their own version, or, translated a version that they can use. Nathan: Great. Were there any other conferences that stuck out in your mind? Did you get a chance to participate at all, or were you just kind of giving the conferences? Steve: Well, the workshop on Monday, and then Tuesday, Wednesday were the- I guess I would say somewhat the normal set of conference topics and discussions. And this, to my mind, or to my knowledge, was the first major United States-based conference in France. Certainly it's the first EE Global - Alliance to Save Energy/EE Global. So um there were quite a few Americans, quite a few old faces from around… …and other places. There was a lot of good discussion, generally of course around the stimulus bill and US based policy as well as a lot of discussion of European issues so I think to that degree it was successful and people are still, to some degree, trying to crack the same problems they have all along about finance and programmatic structure. But now with a lot more emphasis from stimulus funds across the US and stimulus funds in Europe. Nathan: From just the information you gathered there is Europe and I guess the rest of world following the US’s lead in trying to rejuvenate the economy via energy efficiency and clean energy or is it kind of, did you get that impression at all? Steve: Well, I think the, I’m not any expect I don’t think so but for many years they’ve had EE goals and they’ve had national goals and they’ve been to some degree ahead of us on a policy basis and they’re much more amenable to regulation generally, the population. There’s been a more tight regulatory environment and they’ve been trying to work out the details of each member state would actually account for its savings and what the overall framework and structure of EU directives was going to be. The US of course has not taken a big policy lead on it with the exception of states like California and now more recently large emphasis from the federal government so I think the federal government stimulus bill particularly directed towards efficiency dwarfs anything in Europe right now. Again the federal government here is so much stronger, there’s not really an EU, strong EU federal government so to speak. Nathan: That’s interesting. I was just glancing at our stats and for a number of visits France has  actually up there as one of the… Steve: I think it’s third. Nathan: Yeah, it looks like Thailand passed it so it’s fourth in number of visits over the last year so we’ve had you know a thousand individual people visiting the site from time to time over the last year. That’s a tenth of the States, we have over ten thousand here but still pretty high up there, so I think it’s a good place for… Steve: Yeah, we’re definitely trying to work out with France and more details on training and corporative training and I think they’ve, and for a lot of political reasons they definitely want to be aligned with us and yet still go their own way, which is fine. For what it’s worth I think, I’ll call it officially third because Thailand, probably a lot of those hits are coming from our own website. [laughs] Nathan: Fair enough. [laughs] Steve: I actually recorded that, made that famous statement to them, and I think in the room, they are number three. I also mentioned that we do have 144 countries over the last year and now we`re up to about a hundred every month, even in the last few months the variety has gone up, or the range has gone up. The message is getting out there, I think that`s become more compelling to everybody that we are now just truly international and there’s no, we don’t have to really say that anymore because it speaks for itself. You can see our statistics. Nathan: Especially with all the translation that happens because it’s important to remember you know when Quebec and France view versions of that, you know, that also opens it up to Morocco, and the rest of the world that speaks French so, you know, with French and English. Do you know, what other language do we have? Steve: The next big one was just Porchagese, we got up a couple of weeks ago, and there was a big bump one day from Brazil and Portugal and I was wondering why that was and it turned out we just posted a Porchagese translation. The other one’s Poland and I think, probably through John Cowan and his World Bank connections, they’re working on other languages, I’m not sure, but I think those are the big four; English, French, Porchagese and Polish. Chinese of course we’re working on too, Mandarin. Nathan: Mandarin, right. For anyone that wants to get more information, the EE Global website is eeglobalforum.org. Do you know if there are any recordings of what was going on or it is one of those “have to be there in person to experience it” type deals? Steve: I believe you had to be there in person to experience it. I actually did take a few voice notes on my phone and a couple of times I was thinking about this blog, how if I was just a little more prepared I have been almost live blogging some stuff. It wasn’t without some, you know, I think controversy or at least some emotional moments in the workshops where people were voicing opinions about where the future is for EM&V. I think as much as it came out positive that EVO has more than likely to continue to play and a further leadership role than now. There are still some questions as to how to manage the upcoming huge demand, whether it’s US stimulus bill, the energy legislate in the US, the global energy efficiency push or the state utility programs that are just blossomi

  3. 08/06/2009

    EVO Insights Episode 1 with Pierre Langlois

    I got a chance to speak with Pierre Langlois at the end of last year and decided to use it as the 1st of a few pilot episodes of our new EVO Insights podcast show. If you're interested in the role of measurement and verification and energy efficiency in the future of the Kyoto Protocol I really recommend it. We used Skype, and there are a couple places were we cut out, but over all very interesting and informative. Click here to listen to the show right in your browser or click here to download the episode. Episode 1 Transcription: Nathan: Welcome to the first ever episode of EVO Insights. I’m Nathan Shetterley, I’ll be your host. EVO Insights is a concept we’ve been kicking around on the web committee for a while now and we’re hoping it’ll be your chance to get to know some of the key players at the Efficiency Valuation Organization and see what they’ve been up to lately. We want it to be your show, not ours, so please give us your feedback at evo-blog.com or evo-world.org. Toady we’ll hear a phone interview that I had with Pierre Langlois in late 2008 where we’ll get to talk about the Kyoto protocol, what’s coming in the future and how IPMVP and EVO can play a role. I hope you’ll enjoy. Today I’m with Pierre Langlois from Econoler International and also Vice Chair of EVO and we’re going to be talking a little bit about Kyoto and energy efficiency and how IPMVP falls into all that. So, how you doing today Pierre? Pierre: Well, pretty good. Nathan: How are things in Quebec, how’s the weather up there? Pierre: Err, well, pretty cold and chilly. Winter is coming up so I guess in a few days we’ll start to see snow. Nathan: Well hopefully in the States we’ll have a couple more weeks before we see that. Pierre, I wanted to talk a little bit today about energy efficiency in Kyoto. For the person who’s just out there and knows Kyoto, they know it’s about reducing carbon and I think most people would think energy efficiency is part of that, but how does that really work with Kyoto and energy efficiency? Is it the same thing as sort of a clean energy project, or how would that work? Pierre: Yeah, well, (gap where unclear over phone), would be then both for renewable energy and other types of projects and the focus would be done for energy efficiency. Unfortunately, as of today, if you look at the CDM small scale board in the UNFCCC essentially there’s less than 2% of the projects that are focusing on energy efficiency and even a very small portion of those 2% are related to demand side energy efficiency, most of it is related to supply side energy efficiency. So energy efficiency in the production sites, essentially the one using coal, and one of the main reasons for that, well there’s a couple of areas that are related to that, so, technically, the problem financing could be applicable for energy efficiency but in reality it’s pretty complicated and we can go into the details of the areas to use in problem financing to benefit energy efficiency projects. Nathan: Yeah, so going directly into that, for the energy efficiency projects that we have now, and I just sort of read over some of the Kyoto protocol today, it was one of the main things. Going into that I guess the first thing was the financial barrier. Why would there be a financial barrier on energy efficiency projects versus a clean energy project? You know, the money’s being put there, it’s the same money, so what’s the problem there? Pierre: Well, you get to one of the… …two issues really… …energy efficiency really there are… …and the transaction costs to be able to get a carbon financing deal out of an energy efficiency project is still quite high and the process is quite complicated. So why it prevents quite small scale projects to be integrated into the CDM mechanics and the GI mechanics. As an example, a typical energy efficiency project in an industry might be one hundred thousand dollars and the potential carbon credits that could be obtained out of a project like that might be something between five and fifteen thousand dollars. For example, then just for that small amount of money the cost to deal up a project, use the methodology, present it to the UNFCCC board, get it approved and then the transaction being made and then you still have to do measurement and verification of savings would prevent the use of such mechanism because of these transaction costs. That’s one of the barriers, instead of either the money not being able to reach the end user, it’s basically the transaction cost that’s too high. So that’s one of the couple of barriers that we can find. The other one might be related to measurement in verification itself, that’s probably a topic that you want to address. Measurement and verification finance efficiency projects might be quite specific to the type of project we're using. So, the  UNFCCC and the CDM Board, essentially, they want to work with the pre-developed methodologies where you use a methodology over and over again over a similar project. A very good example would be a wind power project. Whether you do it in India or you do it in Morocco, and you have a 1 megawatt or a 20 megawatt, basically, the measurement aspect of it would remain quite pretty much the same. If you have a energy-efficiency project, then, obviously, it might… …actually, be different from one project to the other even though you use the same technology. The baseline issue and the way to measure these savings maybe different. That’s how the protocol works, is you develop a basic methodology and use it over and over again. For energy efficiency, it's very costly to develop one methodology and it's difficult to use it over and over again because of the specificity of the project. So, because of that, basically, the project has been very difficult to develop. The only ones that have been developed are usually pretty big projects in pretty big industrial sites. The size of the project makes sense, at least, for transaction cost point of view, and as well for the development of specific... …plan that would be approved by the Board of UNFCCC and then be put in place. Nathan: So, from a very layman’s perspective, I look at that… …knowing about IPMVP, as we already have that, is that something that they're looking at? One of the advantages of IBM BP is that it's flexible enough to go with any energy efficiency project out there and still have a comparable and reliable result. Is that something that they would accept, or is that too wide open for them? Do they want something more specific? Pierre: Well, that’s a pretty good question. EVO has been trying to address that issue with the different stakeholders we're working on that topic, UNFCCC being one of them, World Bank and Carbon Finance Group within the World Bank has been another one. We're trying to push for the adoption of IPMVP as the protocol of reference. So, they can say if something is complying with IPMVP, then it could be acceptable. The problem is, at the UNFCCC… …that they have not approved such a generic protocol so far. They, basically, work on a very, very specific type of protocol that is applicable for one technology, for example. IBM BP is not specific enough. It could be specific enough if we were going to develop a specific plan for a project. But, IPMVP as itself is generic, and that’s the beauty of it in once sense that it can be applicable for any type of project. But, on the other hand, it's too broad to be able to be approved on the way that UNFCCC is working today. But, on the other hand, there's no real other way to do it as if you try to develop on protocol per project. Like we said, that the size of the project and the transaction cost involved in it, then it's likely that that protocol will never be good enough to enable energy efficiency projects to flourish under it. So, it's kind of an adaptation that the people working under the Carbon Financing… …would have to change their views if they want to attract more energy efficiency projects into their portfolio. EVO is working on it and trying to be… …to help them understand the specificity of energy efficiency project as it in general. All the… …use IPMVP as a reference to limit these barriers for the development of projects. Nathan: What are the different outcomes that could of this? I mean, obviously, one of the consequences would be if they don’t adopt it, then they’ll just not have energy efficiency projects or have such a low rate as they do right now. But, if they were to adopt this, what do you think the impact would be? Pierre: Well, if they were going to adopt it then, I guess, the capacity from stakeholders to develop such a project would be increased quite a lot. It would be easier to use that protocol and train people on the protocol so they can be able to develop plans for their own project, and not try to be as specific as to develop a new plan all the time. So, it would definitely enable the stakeholders to look at energy efficiency in Carbon Financing as something that could go together it’s not the case today. But even though that would happen, there would still be the barrier of the size of the project. One of the ways to address that is probably through bundling and a lot of the stakeholders within the market are thinking about this bundling opportunity. Unfortunately it's not something that's easy to do because as you try to bundle projects they are not all the same so they don't use all the same technologies, they're unfortunately not likely to start at the same date and end on the same date. So bundling, conceptually, would make things easier in practice, it's almost never been done because it's too complicated to implement. So a lot of us are working on this issue to try to find the best way to bundle projects to make them s

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News and Information about energy efficiency, measurement and verification, sustainability and all things green. Specifically IPMVP and IEEFP!