The NOVICE project has shown that when scoping energy efficient building refurbishments, including DR as an opportunity can generate an additional revenue stream that could reduce overall project payback period by up to 16% without negatively impacting on occupant comfort. Whilst the value of the DR revenue stream is always likely to be small in comparison to the revenues from energy savings and reduced maintenance costs, a 16% reduction in payback period (and therefore improved return on investment) is likely to turn projects that were on the borderline of being investible into projects that are economically viable. It is therefore worth considering the potential for DR in every whole building energy refurbishment, but in particular in cases where the economic viability is marginal. This could help to drive up building renovation rates in Europe whilst at the same time accelerating the smart energy transition.
The NOVICE dual services approach of combining EE with DR via an EPC becomes more viable as more of the following conditions are met:
• The right equipment: The building must include energy assets that can be used in a flexible way such as industrial equipment, HVAC equipment, refrigeration equipment, energy generation, battery storage, renewable energy generation with battery storage and a Building Management System. The more types of equipment on site, the more DR markets the site can participate in, therefore the greater the value of flexibility.
• The right building type: Buildings more than 20 years old, that have not yet undergone a refurbishment often have lots of opportunity for energy saving. Buildings with a large annual energy consumption, where energy is a significant cost to the building owner are more likely to take up EPC. Buildings with a wider range of acceptable operating parameters have a bigger opportunity for flexibility revenues. Large hotels, large offices, hospitals, and large retail premises appear to be the most suited to NOVICE.
• The right market: NOVICE will be most successful in a country with both a mature EPC market and a mature DR market. Building owners and ESCOs must accept the EPC model as an acceptable and trusted method of achieving improved energy performance. Aggregation must be allowed. Energy assets must be allowed to participate in a range of DR programmes, rather than having commit to only one.
• The right contractual models: Standard EPC contractual templates are needed to minimise the legal and administrative burden and cost of procuring dual services EPCs, particularly because these are likely to be more complex than standard EPCs. ESCOs must be willing and able to sell, finance, and operate an EPC. ESCOs and aggregators must be willing to work together and must find suitable contractual approaches to managing the relationship between them including: client management; roles and responsibilities; distribution of revenue streams.
• The right finance: In order to drive up building renovation rates in Europe, the barrier of access to finance for EE projects must be overcome. Due to the uncertainty over revenues from DR, most third party investors would not consider a dual services EPC to be any more bankable than a standard EPC. Standardisation of contracts and processes, and bundling of similar projects will increase the attractiveness to investors.
