An innovative financial device for energy infrastructure

Since 1991, the Land of Upper Austria has been pursuing an active energy policy, providing incentives for energy efficiency and supporting the development of alternative energy sources, pilot projects and infrastructure. With the help of innovative ideas and European funding.

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This cooperative biomass power plant in Weyer Markt provides hot water for 121 customers through a 11 km network. This cooperative biomass power plant in Weyer Markt provides hot water for 121 customers through a 11 km network.

Context

30% of the energy consumed in the Land of Upper Austria is now generated from renewable sources. This also has positive implications for regional development and the Upper Austria Objective 2 programme, which covers 150 municipalities and targets energy as a priority, has contributed to this success. In this part of Austria, about 100 municipalities and companies have opted for the formula of the "Energy Contracting" scheme, an innovation, if not a revolution in the financing of energy infrastructure. Upper Austria is the first region in Europe to implement such a third party financing system.

How does it work? Take the example of a municipality that wants to modernise its lighting or heating, or provide total thermal insulation of a public building. It issues a call for tender and selects a specialist company that not only installs the equipment, but also takes on the task of managing the entire project, including the overall financing and the ongoing maintenance. By the terms of a contract the entrepreneur will then guarantee the municipality a certain level of energy savings. This guaranteed saving enables the municipality to reimburse the investment or even, after a certain time, to finance new projects.

"We are in a sense contracting out the energy budget,” explains Erwin Moser, director of the municipal administration of Munderfing (pop. 2 700). "For the new municipal lighting, we signed a contract for 120 months to install 318 street lamps. Total cost: EUR 165 000. Previously we consumed up to 46 614 kWh a year. We are now consuming 35 900 kWh. That represents a saving of 10 714 kWh a year, or 23%, and that is guaranteed by the contractor.”

A win-win formula

Contracts of this kind, for which the regional energy agency "O.Ö. Energiesparverband" (ESV), an institution of the Land of Upper Austria, provides advice, support and subsidies (on average equivalent to 14% of the costs and up to 25% in the Objective 2 area) can also be used by companies.

Based in Losenstein, the Weber-Hydraulik company (170 employees) builds telescopic arms and cutters used by fire fighters. When extending its premises it decided to take the opportunity to change its heating system to an eco-friendly biomass heating system by using the Energy Contracting Programme. "It is a win-win formula,” says Kurt Sperrer, head of production. "Although we now have a greater area to heat, we have replaced 4 600 m³ of fuel oil costing EUR 85 000 with 7 200 m³ of biomass costing EUR 60 000. We have a 15-year contract with a heating company that guarantees us a 25% energy saving. In practice the saving is 40%. To fuel the boilers, we signed a contract with a farmer who supplies wood chips.”

Results

The Contracting formula is beneficial to both parties:

  • The mandator (local authority or company) does not have to spend money on new equipment.
  • The energy savings guaranteed from the start by the contractor make it possible to finance the investment.
  • The mandator benefits from the know-how of the contractor and from the latest energy management technology.
  • This embracing of cutting edge technology enhances its public image.
  • Its staff are free to concentrate on the company’s core business, the contractor being responsible for the maintenance of the infrastructure.
  • The contractor is assured a relatively long-term contract with a solvent client.
  • He remains at the forefront of the technology and enjoys market visibility.

 


Draft date

01/06/2007