Good practice:

Coolbawn Water Treatment Plant Biomass ESCO Project

The Coolbawn Water Treatment Plant project was commissioned by Tipperary County Council and included both renewable energy and energy efficiency elements. The works included the installation of a 85kW biomass boiler, improvements to the insulation and air tightness of the building and installing additional zone controls to allow effective use of the heat being generated. The project was identified as part of a detailed energy audit conducted by the Tipperary Energy Agency as a part of its energy management service to the Local Authorities of County Tipperary. The Tipperary Energy Agency, acting on behalf of Tipperary County Council, specified, project managed and procured the project by utilising an Energy Services Contract (ESCO) approach. The contract was a 7 year contract to design, supply, finance and install plant and to supply all heat and operate and maintain the plant. The Sustainable Energy Authority of Ireland (SEAI) provided a government grant of 35% of the total cost. The total capital cost to the energy consumer was nil. The annual cost under the ESCO contract was lower than the historic cost of fuel (oil), resulting in a (small) annual saving for the energy consumer during the first 7 years of the ESCO. The ESCO terminates after 7 years, at which point the plant will become the property of the local authority, resulting in material energy savings going forward.

The works were procured on a design, supply, install and operate basis, terminating after 7 years. The ESCO provider met 65% of the capital cost, 35% was met by a government grant. Technical and financial expertise in designing and managing the ESCO was provided by Tipperary Energy Agency.

The total capital cost to the energy consumer was nil allowing the project to be completed under operational budgets. The annual cost under the ESCO contract was lower than the historic cost of fuel (oil), resulting in a (small) annual saving for the energy consumer during the first 7 years of the ESCO. During the period of the ESCO the estimated savings for the consumer were €20k in total, with estimated annual savings of €14k arising after the end of the contract.

The ESCO contracting procedure can be complex – risk allocation is key and it is necessary to assign risks to the party best placed to deal with them. Also, it should be noted that contract finance is not cheap.

While a small project, this is a good example of using the ESCO approach to finance renewable energy generation and was shared with project partners at one of our interregional exchanges. It illustrates how an ESCO can be used by a public sector organisation to leverage private sector investment. ESCO clients can complete projects under operational budgets while ESCO providers can generate a recurring revenue stream for the term of the contract. Stakeholders suggested that public support in the form of low-cost loan finance to ESCO providers, possibly combined with grant support to public bodies for ESCO projects, could be effective in securing greater private investment in suitable RES projects.