Q&A with Sandra Seah on Energy Management

Q: You have been a long time advocate of EE or energy efficiency. Why?

The best energy is the energy you don’t use and energy efficiency is the means to achieve that.

Energy efficiency is acknowledged to be a critical partner to all manner of decarbonisation efforts and it helps to enhance energy security, promote productivity and boost environmental sustainability of most economies. In current day parlance, “energy management” has replaced the old jargon “energy efficiency”, connoting a systematic strategy for the planning and operation of energy production and energy consumption accompanies by energy distribution and energy storage.

Q: What common mistakes do businesses make when it comes to procuring energy management projects? How can they be avoided?

In our work, we frequently find that there are several areas where businesses could do better to prepare for energy procurement:

Not analysing energy use: A better understanding of where, how and why energy is used can help a business unlock multiple opportunities for both immediate savings and longer-term efficiency improvements. An analysis of energy bills and processes is an important first step.

Not involving employees: Employees are valuable resources, best placed to understand the organisation’s energy use, identify efficiency opportunities and undertake energy saving actions. Not actively engaging the work force on proposed measures to increase energy efficiency and savings risks the implementation of conservation measures that do not commensurate with operations or expectations.

Not engaging an experienced consultant: An established Energy Services Company (ESCO) provides a more fulsome service which typically includes financing, design, implementation and management of projects. In particular, an accredited ESCO would be of tremendous assistance in providing energy auditing services, supporting services procurement and selection procedures, and provide advice on the availability of any public sector incentive schemes in the promotion of energy efficiency.

Is the emission reduction always directly correlated with lower energy consumption?

It is worse than that based on IEA’s reports.

There is a relationship (bi-directional causality) between energy consumption and CO2 emissions. Energy consumption cause CO2 emission (in the short run), implying that an increase of energy consumption could lead to an increase of CO2 emission, and vice versa (in the long-run).

Q: Can you share a case study where a company successfully transitioned to ‘an ideal’ state of energy efficiency? How did they achieve it?

I can give no better example than the well run BCA SGBC BREEF SCHEME which has been in place for a good number of years in Singapore:

• An accredited ESCO by SGBC undertook energy audit and recommended ECM for aging building infrastructure.
• The BREEF scheme, facilitated by BCA and participating banks (DBS, UOB, RHB, Mitsubitshi HC Cap, IFS Cap, ORIX Leasing), offers financing to pay the upfront costs of energy retrofits of existing buildings, through an energy performance contract arrangement. BREEF can cover the cost of equipment, installation and professional fees.
• The ECM must lead to achieving a minimum Green Mark Certification standard for the building, which is maintained throughout the loan tenure.
• The EPC is a template standardised contract drafted by Bird & Bird and free to download
• The Singapore Government underwrites the default risks to the participating banks.
• There is regular ongoing energy audit to identify further Energy Management measures and to track progress.
• There is also a building use manual for building operator and occupants prepared by the ESCO and updated regularly.

The BREEF SCHEME ends its run in 31 March 2023, but remains one of the best and longstanding example of a government led multi-pronged and sensible approach to enhancing the energy efficiency of commercial and industrial enterprises.

Q: What are the most prevalent contracting models for energy efficiency projects?

There is no one size fits all and ESCOs offer a range of customised solutions.

The most common models include pay for performance, energy savings (shared), energy performance (guaranteed) to meet different budget and business. However, energy management contracts also comprise of distributed generation, distributed storage, demand management and demand response solutions. These are clever mechanisms which essentially saves energy and provides energy security by matching supply to demand at the most optimal cost.

Q: What is this new Energy as a Service (EaaS) model we have been hearing about?

Energy Management seeks the most cost effective use of energy whilst reducing energy demand. As energy management solutions may be capital-intensive and a burden to businesses already struggling with inflationary pressures, EaaS has become an increasingly attractive option.

Under an EaaS agreement, the energy service provider (ESP) secures third-party funding to pay for all project costs, so the business has no upfront expenses or internal capital and the transaction is treated as an off-balance-sheet financing solution. As the EaaS model generally operates on a pay-for-performance model, the ESP bears the performance risks and is constantly seeking cost efficiencies. The ESP also tries to harness the best-in-class technology (AI and blockchain includes to enhance smart automation, asset management and predictive energy use to secure more savings for the business. The ESP usually bundles energy consultancy, financing, asset installation and energy management solutions all-in-one for customers.