Lack of Interest, Knowledge and Financing in Energy Efficiency, and Performance Contracts

Energy efficiency is a concept that complements and cuts across national strategic objectives such as ensuring energy supply security, reducing risks stemming from external dependency, making energy costs sustainable, increasing the effectiveness of climate change mitigation and protecting the environment. In an era where the importance of sustainable development is increasingly understood, the value of efforts directed toward energy efficiency is growing at the same rate. Within this framework, improving energy efficiency at all stages from energy production and transmission to final consumption, preventing unconscious use and waste, and reducing energy intensity both at sectoral and macro levels are priority and important components of our national energy policy.

The first paragraph of the Energy Efficiency Strategy Document contains an extremely well-articulated definition of energy efficiency as outlined above.

Within this definition, we need to consider energy efficiency in an environment where energy use is increasing without pause and will continue to increase (Figure 1), within the context of limited energy resources and a world to be left for future generations.  

Figure 1: World energy consumption (quadrillion BTU) EIA International Energy Outlook 2017

If we look at the history of efficiency work conducted in our country, we actually need not go very far back. The "Energy Efficiency Law" enacted in 2007 can be considered as the beginning of serious efforts the state would undertake in the field of efficiency.

However, when we examine the work done in the field of efficiency by developed countries and the point they have reached, it becomes clear that we are far behind.

The concept of energy intensity, mentioned at every seminar and conference as the most important indicator in the field of efficiency, representing the amount of primary energy consumed per gross domestic product, used worldwide and demonstrating the progress made across the country in terms of efficiency, clearly demonstrates this situation. From the days when the concept of energy efficiency widely entered our lives, we keep saying "we use energy inefficiently at half the rate of the EU and a quarter of Japan's rate." It is true that we are making increasingly greater progress in changing this, but whether it is sufficient is another matter. Projections, future forecasts, strategy documents follow one after another, figures, data, and savings rates are flying through the air, but we still cannot reach the level of other countries from which we are far behind. Therefore, we are still at the beginning of the road for "easily achievable efficiency rates" of 15-30 percent in industry, buildings and transport. Yet, as shown in Figure 2, according to a projection made for 2020 (which, though old, still has validity), the importance of the gains that can be obtained through efficiency work is evident (green section).

Figure 2: Energy Savings Potential by Sector (2020) Turkey Energy and Energy Efficiency Studies Report-2010

The fact is that before interest and knowledge in efficiency matters, a lack of financing emerges as a problem owing to our country's overall situation, and will continue to emerge. In fact, this notorious trio appears across almost every issue, but it appears even more frequently in the field of efficiency.

Let us consider an SME. There is no need to pay much attention to large enterprises because they are already conducting their own efficiency studies out of necessity, given production costs being the most important issue they must consider. However, SMEs have neither knowledge nor interest in this area, nor do they have significant financing resources to spare. These three concepts can interchange positions among themselves, but they are fundamental shortcomings. All depend on the state, on universities, on civil society organizations—in other words, on responsible institutions and organizations. The laws and regulations enacted have only a certain level of advisory effect but are not particularly successful in attracting interest and creating financing under different conditions. Energy service companies authorized to operate in the field of industrial energy efficiency (ESD—Energy Service Companies) are unfortunately still trapped in this bottleneck. As a method that can address the shortfall in energy efficiency financing and offer a solution, the concept of "energy performance contracts," which is quite widely used abroad, can be cited.

This type of contract, in brief, is the financing of efficiency-enhancing projects conducted regardless of location by means of savings obtained as a result of efficiency work to be performed.

Although the system has different models, fundamentally it is a system in which the individual does not provide capital for efficiency work to be conducted, and all financial and implementation risks are borne by the implementing ESD company, which guarantees savings resulting from the efficiency work it performs. Because the history of efficiency work and ESD companies in our country does not go back very far, this model has not yet been widely implemented. Moreover, it is not particularly easy for this system, which operates efficiently abroad, to be conducted by ESD companies that are not technically strong and cannot stand behind their work. While financial institutions have begun to offer loans individually in the field of efficiency, they have not yet engaged in such arrangements with ESD companies. Another important matter for executing "Performance Contracts" is properly establishing the financial model between the technically strong ESD company and the financial institution. As a result, the first thing that needs to be done in the energy field is neither the use of domestic sources nor emphasis on clean energy. The first thing that needs to be done is to use energy more efficiently and therefore consume less, so that we need to produce less. A mechanism needs to be established that will direct people's interest to this field, increase their knowledge, and ensure the guidance of ESD companies that have correct and cost-appropriate financing. Particularly as a result of new regulations introduced for ESD companies, the new structure that emerges and financial institutions now placing greater emphasis on this issue will pave the way for new developments in this field.     Mürşat Özkaya Chemical Engineer