Super ESCO
Policy measure

According to ADB (2009), one of the objectives of the Philippine Energy Efficiency Project is to support ESCO development in the country. Through Sub-component 2.1 of the project, the establishment of a so-called Super ESCO, the Philippine government will introduce incentives and technical expertise to industry. Sub-component 2.2 has funding totalling USD 8.0 million.

Implementation

ADB (2009) describes that the Philippine “Government’s strategy is to develop a working model of a super ESCO as a subsidiary of the Philippine National Oil Company (PNOC) - a government owned corporation under DOE.25 This newly established super ESCO will develop projects for its own implementation (for the public sector) and support development of other ESCOs (for the private sector) by providing financial and technical advisory support. The range of services offered by a typical ESCO includes (i) preliminary feasibility analysis including detailed audits of facilities and design of energy-efficiency options and financing; (ii) installation services and management; (iii) operation, maintenance, and performance monitoring; and (iv) promotion of energy-efficiency technologies and services. A single organization leading all ESCO-related activities will minimize transaction costs often necessary for successful implementation of a benefit-sharing mechanism between a range of participants through financial, technical, and performance guarantees.”

Challenges

The following challenges have been identified with regard to developing the ESCO market for the industry and commercial sectors (ADB, 2009):

  • “Not enough ESCOs will be interested in the super ESCO’s offers (financing and capacity building).

  • End consumers may not trust a government supported ESCO because of perceived bureaucracy, (iii) competent staff may not be available to implement the super ESCO business plan.

  • Legal and procedural complications may slow the needed quick disbursement.

  • The ESCOs may not be able to design a benefit-sharing contract that will encourage all parties - super ESCO, private ESCOs, and end users – to continue energy efficiency-related activities to make it a sustainable sector despite the high tariffs. Appropriate measures are being developed to address these risks in the ESCO business plan.”

Outcomes

The main expected outcome of Sub-component 2.1 is to facilitate a viable ESCO industry. According to ADB (2009), at least 6 public sector projects (USD 3 million) and 15 private sector projects (USD 1 million) were completed by April 2011.

References

ADB (Asian Development Bank), 2009. Proposed Loan and Administration of Grant Republic of the Philippines: Philippine Energy Efficiency Project. Available at: www.adb.org/Documents/RRPs/PHI/42001-PHI-RRP.pdf.