Energy Efficiency in Italy - How has the market evolved? Interview with Dario Di Santo, Managing Director of FIRE

Last month, Joule Assets Europe become a member of FIRE – the Italian Federation for Energy Efficiency. We were fortunate to sit down with Managing Director, Dario Di Santo, to discuss FIRE’s role in Italy, the impact of energy efficiency on the EU’s 2030 climate objectives, and how the Italian ESCO market has evolved over the past 20 years.

 

1.       What is FIRE and how do you support the Italian ESCO market?

The Italian Federation for Energy Efficiency – FIRE – is an independent non-profit organization, whose purpose is to promote sustainability and the efficient use of energy. FIRE was founded in 1987 and operates by supporting companies and people involved in the energy sector and promoting – in collaboration with the relevant institutions – a positive development of the legislative and regulatory framework in order to foster an efficient use of energy.

FIRE has around 450 members, which cover all the energy sector (e.g. energy efficiency technologies producers, power producers, distributors, ESCOs, large and medium enterprises, universities and research centers, energy managers and energy professionals).

FIRE has around 450 members, which cover all the energy sector (e.g. energy efficiency technologies producers, power producers, distributors, ESCOs, large and medium enterprises, universities and research centers, energy managers and energy professionals). Around half of the members are organizations, the other are persons. This type of membership ensures that FIRE has a holistic approach to energy efficiency and energy productivity.

Finally, since 1992 FIRE manages the Italian energy manager network on behalf of the Ministry of Economic Development.

We support the ESCO market through many actions and projects, including an annual conference dedicated to EPC and third party financing, working groups and training courses dedicated to ESCOs and EPC, lobby action to improve the legislation in the sector, also in cooperation with the ESCO associations, and the involvement over the years in many EU projects dealing with the ESCO activity (e.g. ESI Europe, guarantEE, Whaves, ST-ESCO, Eurocontract, Greenlight, etc.)

2.       How was the evolution of the ESCO market in these 20 years?

At the beginning of this century around 30-40 ESCO were active in the Italian market. Most of the activities were directed to the public sector, for public lighting and heat service projects, and on cogeneration. The introduction of the white certificate scheme, which indicated ESCOs as one of the subject allowed to present proposals, has greatly stimulated the market. Over 3,000 companies defined themselves ESCOs after 10 years, even if most of them were fundamentally consultant companies.

The introduction of UNI CEI 11352 – the Italian standard for the certification of ESCOs – together with and the obligation to be certified to participate to the white certificate scheme and to produce mandatory energy audits under art. 8 of the energy efficiency directive, reduced the number of ESCOs and allowed for a better qualification. Presently there are around 890 certified ESCOs in Italy, but only a part of them is effectively involved in EPC contracts. In any case there has been a good development of the ESCO market, and much more could be achieved thanks to the rise in awareness, schemes like the energy efficiency fund, and the introduction of new financing options.

3.       How do you see the role of ESCOs in the larger context of the energy market and to the achievement of the EU’s 2030 climate objectives? Do you think they represent a threat to large traditional players, a challenge to the status quo?

ESCOs will surely play an important role towards the EU’s 2030 targets. The energy efficiency market is huge and is constituted of many different users, from large industry, to SMEs, public administrations and residential buildings. Such users have different needs and characteristics. Some will mainly take advantage by large players (including utilities), others by ESCOs and other companies active on smaller areas. Besides, there will be space for cooperation.

ESCOs will surely play an important role towards the EU’s 2030 targets. The energy efficiency market is huge and is constituted of many different users, from large industry, to SMEs, public administrations and residential buildings. Such users have different needs and characteristics.

4.       What have been the main regulatory enablers and barriers in the last years to the development of Italian ESCOs (e.g. feed-in-tariffs, white certificates, tax reductions, etc.)?

The incentive schemes, in particular white certificates for energy efficiency and the feed-in tariff for photovoltaic plants, have indeed been important enablers, together with information and training activities and with the introduction of the UNI CEI 11352 standard. Among the barriers, apart from the traditional ones affecting energy efficiency, the small capitalisation and short life of many ESCOs is one of the main issue, together with the lack of financial tools suited for ESCOs and EPC.

Thanks to many EU actions, such as EEFIG and DEEP, the ICP project, and platforms like eQuad, things are changing positively, but a lot remains to be done to achieve the potential of the ESCO market. Another enabler for the ESCO market is the diffusion of measurement and verification protocols for energy savings. Energy efficiency performance is not easy to evaluate, but without a reliable measurement and verification procedure it is difficult both to guarantee the performance and to get financing. That was the reason why FIRE promoted the IPMVP protocol, the most used at international level, partnering with EVO and producing the Italian translation. Its application will facilitate the diffusion of EPC contracts and the involvement of banks and insurance companies.

5.       What about internal barriers – what’s the aspect in which ESCOs struggle the most: finance, technology, sales, marketing?

Finance is generally one of the main [barriers to growth for ESCOs]. Also, the sale and marketing capacity of ESCOs are not always sufficiently developed, as a result of the small size of many ESCOs.

As I mentioned in the previous point, finance is generally one of the main issues. Also, the sale and marketing capacity of ESCOs are not always sufficiently developed, as a result of the small size of many ESCOs. We think these types of problems will be overcome over time through growth, mergers, and acquisitions by larger players, and through standardization of projects, which will act as a facilitator.

6.       You are active players at a European level as well – where do you see the Italian energy efficiency market compared to other EU countries?

Traditionally Italy has had a low energy intensity and consumption per capita, due to both its lack of fossil energy resources and to its economic development. It has also been able to introduce innovative/effective laws (e.g. law 9/1991 on distributed generation and law 10/1991 on energy efficiency) and schemes (e.g. white certificates and tax reductions). Sites certified ISO 50001 are fast growing (more than 1,800 in the beginning of 2018), despite the lack of incentives, and many large companies started evaluating multiple benefits of energy efficiency (both facts being signs of advanced background).  Moreover, Italy has many companies involved in the production of energy efficiency technologies and in delivery of energy services. So the starting point is a good one.

Nonetheless, SMEs and public administrations and buildings are still far from being exploited in terms of energy efficiency. Traditional barriers hamper the achievement of large renovation and improvement potential. Compared with other countries, we see similar issues, even if with different degrees of development, due to cultural, economic, climatic, technical, and historical frameworks. There are many opportunities to learn from other experiences, but at the same time there is the need to discover paths that are more in line with each country’s situation.

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