Consolidation of the group’s "Lietuvos Energija" ongoing energy efficiency projects and establishment of a separate company
The rapidly changing energy sector and challenges of climate change demands not only modernization of physical infrastructure of energy sector but introduction of innovative business models. All around the world state owned energy holdings are shifting from day-to-day business to public private partnership programmes, energy service company models and similar. Acknowledging the need of the market, the “Lietuvos Energija” group (a state owned energy holding, governed by the Lithuanian Ministry of Finance) in 2016 decided to consolidate the group’s ongoing energy efficiency projects, and to establish a separate company – ‘Energijos sprendimų centras’ (Energy Service Company - ESCO).
The company invests in modernisation and the introduction of new energy efficiency measures both for public and private companies in Lithuania; and for each of which, the initial investment is later recovered through a monthly service fee over an agreed period of time. ESCO offers solutions to its clients that can save on energy bills; reduce energy use or costs, increase efficiency or replace fossil fuel use to renewables. By financing the development of EV infrastructure, ESCO is promoting energy efficient benefits (as well as a more localised mix of energy production) of driving greener electric transport. Moreover, ESCO offers a flexible financing scheme to its clients, based not on a physical infrastructure itself but on services of EV charging, operation, maintenance and so on.
In total, the practice required around 1,000,000 EUR, all of which is the company’s own investment - most of the funds were acquired from Lietuvos Energija (main shareholder) as shared capital. Other part was borrowed from commercial banks.
Evidence of success
In less than one year, more than 10 projects were implemented. ESCO clients saved up to 16 800 000 kW of energy (based on client’s previous energy usage) due to increased efficiency.
Potential for learning or transfer
The ESCO model is particularly attractive to public and private company clients that do not have extensive funds. The costs of the investment or strict fiscal rules for leasing or a loan can discourage a company to implement one or another initiative. Therefore, ESCO can offer attractive financial conditions and offer up to a five year contract that would include installation of EV charger, its operation, maintenance or even the lease of an electric vehicle.
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