Investments in energy saving measures in Italy and UK: the impact of national support schemes on the business strategies of an ESCO

Energy effi ciency measures can be tailored to suit diff erent customer segments, with a comparatively wide range of returns on investment. ESCOs are thought to be a key player facilitating the practical implementation of energy-effi cient measures. However, limited awareness of end-users about the available technologies, as well as concerns on the availability and ease of obtaining funds to fi nance energy-effi cient measures are limiting the diff usion of such technologies. Policymakers in Great Britain (EEC scheme) and Italy (TWC scheme) have addressed energy effi ciency issues through the implementation of national policies based on market-based instruments, where energy effi ciency measures are linked to tradeable assets. When comparing the two schemes, however, there are signifi cant diff erences which aff ect the information and fi nancial incentives available to developers of energy effi ciency projects. Th is paper carries out an empirical analysis of such diff erences, as seen from the point of view of an ESCO potentially interested in investments in energy effi ciency projects. Its fi rst part outlines the regulatory and market framework for energy effi ciency measures in Italy and UK, including energy effi ciency targets and achieved outcomes to date under the analysed schemes. Th e key factors aff ecting business choices for an ESCO aiming to operate in the energy effi ciency sector in either country are outlined in a strategic overview. In the second part, further to a survey on relevant costs and prices, we carry out a fi nancial appraisal of investments in selected energy saving measures to be implemented by an ESCO. Th e fi nancial analysis is carried out in three national scenarios: two are refl ective of the existing regulation in Italy and Great Britain, while the third aims to portray the hypothetical situation resulting from the implementation of the Italian TWC scheme in Great Britain. Under all scenarios, the aim is to evaluate the eff ect of such TWC scheme on the net present value of the investment, calculated before interests and tax. Th e empirical analysis carried out for selected case studies shows that the fi nancial incentive provided by WhCs may well be sizeable, and is even more important for those projects where the Net Present Value without WhC contribution is a small number.