Financial impact of energy savings

Big gains – small investments
Some energy savings can be achieved with no, or very little investment, for example in areas such as behavioural and operational changes.

Larger energy saving initiatives require bigger investments, but also provide greater and lasting savings. This applies to areas such as IT, lighting and green construction or renovation. In order to asses which initiatives should be implemented, it is important to look at the repayment timescale of specific projects.
It is also possible to get inspiration and knowledge from some of the organisations and places that have already implemented energy saving projects.

Look at the total costs
It is very important to look at the total costs in relation to improving energy efficiency – i.e. the total purchase price, annual electricity consumption, and the consumption over a product's life cycle. This is valid irrespective of whether it applies to energy renovation, IT equipment, purchasing or lighting projects.

Focusing in the short term on the purchase price and immediate savings costs the Danish public sector millions of Euro every year. Solutions, which initially appear the cheapest, can be the most expensive in the long term as a result of high energy consumption.

The Danish Energy Saving Trust has different tools that put the focus on the total costs associated with purchasing and tendering. One example is the Total Price Calculator which works out a product's overall price by looking at the purchase price, energy consumption per year and energy consumption over the product's life cycle.

We recommend that the public sector includes in its purchasing and tendering policies a requirement to assess the total costs. The Purchasing Guidelines identify requirements covering energy consumption that you can insist on.

Loans outside the borrowing frameworks for the Danish municipalities and regions
The municipalities and regions are usually constrained by fixed borrowing frameworks. But when it comes to loans for energy savings these can be obtained outside the usual frameworks. The advantage of this is that the municipalities and regions do not need to make cuts in their other activities in order to invest in energy savings.

Borrowing money for energy savings requires that the energy saving initiative are recommended in an energy label or an equivalent energy scheme.

Receive subsidies for energy savings
The Danish energy companies are committed to reducing the energy consumed by end-users on the basis of agreements with the Danish Energy Agency. They therefore must report achieved energy savings to the Agency. One element of this is that they have resources which can be used for providing advice, and for offering subsidies for investments in energy saving initiatives by institutions, offices and companies, etc.

If you want to sell the ownership of your savings to an energy company, you will need to agree in writing to the sale before carrying out the energy savings project. You will also need to document the savings. However, even if you sell the ownership of your savings you will still receive the money saved on your energy bill.

In terms of energy savings, there are several models that can supplement or replace a centrally administered scheme:

• Incentive model, which rewards decentralised savings
• Binding agreements on energy savings
• Agreements with Energy Service Companies (ESCO) which identify and implement guaranteed energy savings

Incentive model motivates at decentralised level
This model typically reinforces the motivation to save energy by using with a financial model which includes an incentive for decentralised public sector institutions.

Around 60% of all Danish municipalities work with an incentive model which a share of the money saved back to the individual institutions. The model helps staff take ownership of the initiative, and motivates them to save energy.

Incentive models can be constructed in a number of different ways.

The most typical type involves sharing the money between the institution and a central energy pool, to which the institutions can apply for funds for new energy savings projects. This model makes it possible to prioritise and follow-up on the energy saving initiatives launched by institutions, as well as motivating staff to save energy.

Binding agreements on energy savings
Examples of binding agreements:

• Climate Communities
  Many Danish municipalities have formally signed up as Climate Communities with the Danish Society for Nature Conservation, and have all committed themselves to reduce their CO2 emissions by 2-4% per year.
• Curve Breaker Agreements
  Many public and private sector organisations and companies have signed Curve Breaker Agreements with the Trust. In doing so they have typically committed themselves to reducing their electricity consumption by 3-15% over a period of 3 years.

> See list of all Curve Breaker Agreements

Agreement with an ESCO – guaranteed savings
An Energy Service Company (ESCO) provides energy services. An ESCO helps identify the potential for savings in local authority buildings, and carries out actual savings projects. The benefit of collaborating with an ESCO is the fact that savings are guaranteed. If the estimated savings are not achieved, the ESCO covers the difference. In this way local authorities can take out loans in the certainty that they can pay the instalments without incurring additional costs.

> Read more about ESCOs