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Standardisation and Communication of Sustainable Energy Asset Evaluation Framework

Periodic Reporting for period 2 - SEAF (Standardisation and Communication of Sustainable Energy Asset Evaluation Framework)

Reporting period: 2017-08-01 to 2018-05-31

Energy efficiency is quantifiably the cleanest and cheapest energy resource available to us today and therefore benefits from strong regulatory backing both at national and European levels. While the European Commission quantifies the potential of the European energy efficiency market at €8 billion, well under €1 billion is accessible to the energy service industry because of the high costs of due diligence, leaving significant commercial opportunity unavailable. The high upfront costs of project valuation lower the ability of institutional and private investors to invest in energy efficiency projects, hitting small to medium enterprises particularly hard.
The overall objective of the project is to complete and demonstrate through a group of investor and contractor stakeholders, the Sustainable Energy Asset Framework (SEAF) - IT Platform, to lower valuation and risk assessment barriers for SEA projects in 10 EU member states. This will lower the upfront cost for contractor-investor engagement by between 30% and 60% (depending on project type), thereby significantly enlarging the pool of potentially viable projects.
The project's aim was to develop a platform, combining the following existing functionalities:
• Valuation: Robust independent ex-ante automatic valuation of SEA projects for both SEA contractors and SEA investors in different market environments against current market data
• Risk Assessment: Initial audit of the project’s technical risks, including the proposal of risk transfer mechanisms such as insurance of equipment, business interruption or asset performance to increase investors’ trust level in a project;
• Optimization: SEA project optimisation through e.g. identifying additional revenue streams and providing partnering options
• Standardised performance protocols
• Facilitation of the communication and cooperation between investors and contractors

The key lessons the SEAF team learned during the project are the following:
Flexibility and usability
A successful product in this field needs to be both flexible enough to accommodate all the various business models, but also user-friendly enough so that users will actually want to interact with the product.
One of the key values of the SEAF platform is that it gives investors a project report that always looks identical and contains the same key pieces of information needed to make an initial investment decision.
Understanding users on a deep level requires a high level of trust between the platform operators and the users.
The SEAF platform finally addressed one more critical barrier in the energy efficiency finance sector: connecting valuable projects with sources of capital often fails simply because of a communication gap between the main parties involved. Here, the SEAF platform provides a number of tools to support this delicate process, by standardizing the use of terms, and offering explanations on concepts and parameters used.
Stakeholder engagement

Building a solid stakeholder group was key for keeping the development of the SEAF platform as close to the real needs of its potential users as possible.Over the course of the project, the SEAF consortium has organized 11 events, which have been instrumental in building the contractor and investor stakeholder groups and in further educating the SEAF consortium on the needs of the ESCO market. These events include 7 webinars and 4 high level events.

300+ different contractors were present at the stakeholder events and/or webinars. This led to a total of:
• 100+ follow up interviews on the phone or face-to-face
• 67 total MNDAs signed
• 17 total eQuad service agreements signed.

34 different private investors were engaged either in the webinars or at the events, which led to:
• 30+ follow-up interviews
• Gathering of detailed investment criteria from 32 different investors
• Active negotiations are underway with 9 of these investors.

Platform development

This process started with the definition of the services to be provided in the project. These services were organized into three categories: services for contractors, services for investors and services for the platform administrators. Based on these definitions, the actual platform development started, following an AGILE/SCRUM methodology, providing a high level of flexibility and responsiveness to constant inputs and feedback from the stakeholder group. In fact, four platform version launches with respective testing sessions took place throughout the project. The feedback has been overwhelmingly positive, and the high level of stakeholder engagement has shown, that the SEAF platform addresses real needs of the industry. The main results of the project are the following:

• Definition of data security requirements
• Definition of four different user roles: superadmins, admins, QAPs and contractors
• Comprehensive suite of valuation tools
• eQuad due diligence procedure and eQuad certification
• Integration of the IREE certification procedure, provided by ICP
• Intergration of HSB Insurance Statement of Fact
• Structured project finance reports
• Document management system for document exchange and collaboration

For HSB:
• Establishment of an insurance distribution framework
• Development of policy documentation compliant in all 10 target countries
• Development of a customized risk assessment model for insurance rating

• A future-proof SEA valuation model together with its full requirements description for a potential integration into the SEAF platform
In the European SEA market, there is no externally accessible IT platform for financing of all types of SEA projects (in particular small ones) with the functionalities as SEAF. The valuation process for investments in sustainable energy projects is therefore performed on a one-off basis without the use of any form of standardised process.
SEAF significantly lowers the entry barriers to finance for small to medium projects, through combining existing tools and protocols into an all-in-one, easy to use, single source valuation and risk assessment framework. The results and socio-economic impact can be summarized as follows:

Projects funded:
A key KPI for the project was the facilitation of SEA investments during the project in cooperation with Stakeholders: The deployed framework expected to enable between €10-15m investments in small-medium SEA projects in the first 24 months. €9.3m was offered to ESCOs and €5.7m was agreed to in an umbrella contract, with an additional €25m of projects in negotiation with investors.

Job Growth:
The aim was to involve at least 60 contractors, and more than 300 ESCO stakeholders 67 signed an MNDA to enter into business negotiations with the SEAF platform. Furthermore, by addressing small sized single investments rather than large ones, a disproportionately high impact on job creation is expected.

Energy savings and CO2:
With the enabled amount of €5.7m of investments it is estimated that SEAF will contribute to significant CO2 savings through enabling sustainable energy projects. Amounts in a range of 17 GWh of primary energy – corresponding to a range of 6.8 GWh of electricity – could be saved per year with an investment of this size. According to Carbon Footprint calculations, this equates to about a range of 3200 tons of CO2 per year.