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UDC 621.3:005:658.41(470.319)
OPTIMIZATION OF THE FINANCING STRUCTURE OF IMPLEMENTATION OF REGIONAL SYSTEM OF ENERGY MANAGEMENT RELATING TO THE OREL REGION
Lukinov V.A., Doctor of Economical Sciences Pichugin I.L., Post-graduate student Moscow State University of Civil Engineering, Moscow, Russia E-mail: pichuginil@mgsu.ru
ABSTRACT
The article suggests the model of financing of energy saving measures with usage of the regional energy servicing company in the structure of general management system of the regional heat supply. The existing structures of the financing resources are considered and the analysis of models of energy service mechanisms application is carried out.
KEY WORDS
Energy management; Energy service; Finance; Energy savings; Performance; Contracts; Public-Private partnership; Management.
The article examines two the most vital nowadays aspects: sources of financing and participants of financing of implementing the early suggested by us the improved energy management system [1].
From the variety of the well-known finance structures we selected three the most large and vital structures. Figure 1 presents the first structure [2].
Figure 1 - Structure of financing of energy saving projects
Figure 1 shows nearly all possible sources of finance. The use of such structure on the regional level is problematic because some of the mentioned finance sources are out of access, the use some of them is connected with unreasonably great risks. In the Orel region the regional strategy of energy saving [3] was developed. Large portion of budget financing (nearly 30%) the authors suggest to take extra-budgeting. But it is not so easy to realize in practice.
In the survey published in 2012 on the question of energy saving finance [4] the authors developed the third structure presented in Figure 2.
Analyzing the classification in connection with heat supply branch, taking into account its strategic and social importance, the budget funds will suffer from heavy load. To extend the negative leverage in the conditions of weak motivation of energy saving and development energy saving technologies is necessary to use the legislative initiatives.
This becomes very urgent in modern conditions, when heat supplying branch practices the lease of management functions to private companies more often.
Figure 2 - Classification of finance sources
As a rule, they reach an agreement in Energy Saving Contracts. Today three basic models of Energy Service Contracts are developed [7]:
1. The model of savings assurance, its main participants are a customer, Energy Saving Company and Creditor-Company. In this model Energy Saving Company and Creditor-Company (ESCO) in actual fact is a contracting organization realizing the project on all its stages from designing to implementation. Financing is done at a customer’s cost that gets the borrowings from a creditor.
2. The model of split savings is organized in a different way: funds are raised by Energy Service Company and in a fact all the range of works is done also by ESCO. As far as project and payments from a customer are being realized ownerships on the objects of implementation of energy saving measures are transferred [5].
3. The model of interest accountancy suggests an extra participant that provides all liabilities accomplishment. In case of this model usage ESCO gets the definite profits in terms of reduction of risks. But the procedure time increases in connection with appearing of one more participant. The customer in this model is dependent from the rest of the participants; the bank gets some extra costs on Guarantee Company but risks reduce. Energy Service Company interacts with the bank in this model indirectly but through an agent.
The number of drawbacks in these models is mentioned in some works [6]. They are the following: inequality of participation in the project in risks and responsibilities allocation. More than that, the overestimated dependence of one project participant from another is obvious. Some extra finance expenses for debt holdings handling or extra project participants are also marked.
Further in this paper the author [6] suggests improved finance model with engaging of the organized national company integrating the guarantor functions and allocating functions and local ESCO of different levels.
It is obvious that even with the developed mechanisms of energy inspection and energy service this model does not give the answer to the question "how is the heat supply system managed?” Energy audit allows differentiating the possibilities for potential saving and prescribing the list of the necessary actions; energy service helps in energy saving measures implementation by means of tooling of energy saving companies and performance contracts. Nevertheless having realized measures check list is necessary to have clear tooling on non-admission hereafter of different deviations from energy efficient functioning of
heat supply system and business mechanism of this system management in general. These very problems are solved with energy management system.
Estimating the condition of energy service companies and actual situation in the market is possible to stress practical absence of the examples of efficient cooperation with ESCO. Finance mechanism as a rule is investment credit which is given in much overestimated conditions. To put it in another words, in the conditions of extremely high risks of energy saving projects implementation, often it is difficult to find finance sources.
In most cases the claimed firm activity is not realized in practice. As a rule energy inspection is done because the organization according to the Federal Law № 261 [8] must make energy passport where the whole measures complex is presented. After this theoretically energy service mechanism must start. But in practice the inspected organizations refuse to make performance contracts because of different reasons among which is the absence of motivational constituent.
From our point of view the finance tooling via energy service company (ESCO) on the basis of energy service contract formulated in the Federal Law [8] is the most vital and demanded. «Energy service agreement (contract) is an agreement (contract) the object of which is the realization of actions by the executive which are directed to energy saving and energy efficiency increase of energy resources usage by the customer» [5]. From the wording of the contract and provisions described in the corresponding Law article it runs that energy service is a kind of activity when one of the organizations takes the responsibility for execution of energy saving measures, fulfils them at the expense of own finance sources or raised under own responsibility.
The necessity to use energy service mechanisms is conditioned with high project risks to which we can refer low level of capitalization of the being created energy service and engineering companies; falseness of economic effect fixation in the conditions of continuously changing prices and rates; the absence of regulations of investor access organization to finance flows at the realization of energy saving projects; the absence of guaranties of right protection of investor and customer; high finance risks [4].
The main function of energy service companies is guaranties of energy saving measures realization and their finance support.
In this connection to realize energy saving measures we suggest to recognize on the legislative level the necessity of investments into modernization, improvement and focusing on energy saving. It is recommended to work out the addenda to the Regulation containing investment rate depending on measures recorded in energy passports. Among the tooling of attracting investments the mechanisms of public-private partnership are recommended to be used more widely.
Public-private partnership is based on mutually beneficial cooperation of state and individual in declared objectives. [5] In connection with the heat supply sphere the objectives are integrated with other legislative acts. The main one is attraction of private investments into strategically important branch for its development and rationalization.
Realization of Public-Private Partnership (PPP) is heat supply will promote: the development of business constituent of energy saving; risk split; attraction of professional investment staff to energy saving projects, involvement of private investors interested in efficiency increase into management process; decrease of load on the budget at the expense of fundraising for budget objects modernization.
There is a lot of co-financing programs depending on the formed energy politics, the project objectives and targets. In the frame of realization of the project of management system improvement and energy management organization it is necessary to use some of them.
In the developed model of energy management [1] the key chain of command is the Coordination Council that includes qualified representatives of private companies, municipal and regional authorities. It is suggested to organize the Regional Energy Service Company (RESC) on the ground of the Coordination Council. Its specialization will be complex participation in all processes connected with energy service attendance. The basic functions are the following: finance flow coordination, finance resources integration (all accessible sources) on own base, full participation in implementation at all project stages.
The relations between RESC and the enterprises are formed on the ground of public-private partnership, the form of interrelation is chosen depending on established energy policy and is defined according to targets, objectives and the project scope. The works on the project implementation are done by RESC independently or attracting the contracting organizations. Enterprises included into the model have the number of possibilities of investment (according to the suggested legislative initiative this perspective is embedded into the implications of possibility to include private enterprises into the heat supply branch, in fact it is the necessary condition for partnership). Financing sources are found by private enterprise independently, including the attraction of local energy service companies using the above described models. But the key moment is the interaction of ESCO and RESC; finance resources obtained in ESCO come into RESC; and local ESCO will be subcontracting organizations. The developed model possesses the following advantages: complex approach; systematic approach; guaranties from local authorities; high level of participants qualification; risks decrease; balance of interests; actualization on the regional level; fragmentation of financing structure.
CONCLUSIONS
The paper analyzes the present structures of financing and participants of financing of implementation energy saving projects and management systems with heat supply on the basis of which the model of financing with attraction of the regional energy service company applied to the Orel region. It is shown that with regard to the modern condition of systems of heat supply branch management it is reasonable to use energy service mechanisms, particularly, by means of public-private partnership being legislated. It is stated that with the aim of successful realization of the improved model of energy management it is necessary to organize the Coordination Council including the representatives of the municipal, regional authorities and private companies.
REFERENCES
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8. Federal Law of the Russian Federation «About energy saving and increase of energy efficiency and changes implementation into separate legislative acts of the Russian Federation» from November, 23 2009 № 261-FL // Russian Newspaper. 2009. November 27.
