Good afternoon, everyone.
I can answer questions in French and English. It's fine with me. I will provide you with a translated French version of the presentation as soon as possible afterwards.
My name is J.P. Finet. I represent the Energy Services Association of Canada. I'm here to talk to you about how energy performance contracting, as part of the energy-efficiency mode of intervention, can contribute to the Canadian Paris climate change commitments and also provide economic opportunities other than simply saving energy.
First, I'm going to talk to you briefly about who is part of the Energy Services Association of Canada. Briefly, I'm going to explain to you also very simply what is energy performance contracting and the benefits of energy performance contracting compared to other modes of intervention in the marketplace, and also the economic opportunities and environmental contributions ensuing from our work in the marketplace. Then after, you can ask all the questions you want.
The association was incorporated in August 2010. Our membership was founded by six very large companies. A lot of blue chip companies are in there, including Honeywell, Johnson Controls, Siemens, Ameresco, Trane, and MCW. However, we have more members than that. We also have Engie, which is the former GDF Suez, which is worth something like 60 billion euros. We have other energy service companies, but we also have manufacturers that are members of our association, such as Armstrong Fluid Technology, Philips Lighting, and so on.
These are all large, credible organizations. These companies represent approximately 90% or $300 million per year of guaranteed performance contracts in Canada. We represent where we do the most business.
I'll tell you what an energy performance contract is and what it is not. It's basically a partnering arrangement between a building owner and an energy service company. An energy service company is different from any other engineering firms in the sense that what distinguishes us from everyone else is that we guarantee savings. By the way, we intervene mostly in, I would say 90%, public buildings, so either federal or provincial buildings. Ten per cent would be the commercial sector. Basically we do a comprehensive review with guarantees that the savings will be sufficient to finance the cost of the project. If, for instance, in a case where we said we will save 30%—I say “we”; our members say we'll save 30%—in your building and they don't achieve that 30%, we compensate by writing a cheque for the difference. That's why we say the risk is on us. We transfer the risk and financial performance risk to the energy service company.
If you take a traditional engineering firm with their staff, they can make the exact same project, but they will just not guarantee the savings. That's why we provide over and above the traditional way of doing business.
On financing, there's a point I need to make. Our members don't make money from financing operations. Actually, they prefer not to finance. Many governments, like the Quebec government, for instance, even the federal government, use their own money, their own budgets, and we guarantee savings. But if there are clients...there are also some governments that prefer not to use their own money and use off-balance sheet accounting, then we can facilitate it as a pass on...the financing. We are linked to a lot of financial organizations, large banks that will provide the financing for the projects because they know that we are serious and we achieve savings.
As for how it works, before a partnership, the building owner and manager has an operating budget, with which he pays the utility bills. During our partnership, the operating budget is used to finance the energy-efficiency measures and the monitoring and performance reporting and so on, until the cost of the project is repaid. Then the customer—or the client, the building owner—retains all the savings once they have repaid all the costs of the project.
Our members basically make money on the inefficient use of energy, which we replace with the efficient use of energy. We've done a lot, by the way. There's the federal building initiative, a program of Natural Resources Canada that promotes energy performance contracting within the federal government organization. NRCan also provides coaching and qualifies facilitators who accompany building managers in these types of contracts. A lot of provinces also use energy performance contracting, but more could do so. Also, the private sector would gain by using more of this type of risk-free energy contracting.
There are key benefits. They include measurable accountability through performance-backed savings guarantees, and the mutual success guarantees partnering behaviours. Also, it's often used to offset costs around wider improvement initiatives, for instance, asset management. Regularly in our contracts in Canada and in Quebec, we're being asked to use the energy savings to finance asset management and improve the facility condition index of the building. For instance, a lot of schools in Quebec have suffered from a lack of investment through the years and now need a lot of reinvestment. Basically, energy savings also are used to finance these upgrades.
As well, it's a turnkey process with one contract and less coordination risk. If you want to do energy-efficiency projects within the federal government, you could do that on your own. You can hire people, be the mastermind, contract everything and be the general contractor, or you can hire an engineering firm. You can also hire an energy performance contractor, an ESCO, which will supervise everything, act as a general contractor and guarantee the savings.
Another benefit is that the contract value and energy savings are known before the installation commences, based on a detailed feasibility study. Also, there are full benchmarking, accountability and financial tracking. There's also, as I said earlier, a facilitator who accompanies the client in all of that; so there's a third party verification, if you will. As well, all of that is hedging against future increases in the cost of energy.
In terms of economic opportunities and environmental contributions, yes, we can focus, and this all depends on the RFPs that we answer. The criteria will vary by the function of the building and the priority of the client, but if we're asked to put a focus on greenhouse gas emissions reduction, we will put a focus on the measures that address that. For instance, in Quebec, if a building is heated with electricity, then we won't have as many greenhouse gas emissions, so we'll focus on other fuel sources.
As I said earlier, there's the possibility of allocating savings to asset maintenance and to improve the facility condition index, which is another economic opportunity. The fact is that energy-efficiency stimulates economic development and job creation in all regions of the country. Actually, in your case with the federal government, it's basically about leading by example. When you undertake an energy performance contract, you achieve savings and you show the rest of the marketplace how to do so.
If you have any questions, I would be happy to answer them whenever you want.
