Delivering Energy Efficiency in Industry: How the Hera Group turned an obligation into an innovative and successful business strategy

Energy Efficiency

I

18 April 2018

I

Silvia Zinetti

In my last article, I introduced the Hera Group, an Italian multi-utility owned for the majority by local municipalities, and portrayed its unique approach to global sustainable development.

Today the focus is on Hera’s leading role in delivering energy efficiency in industry. Hera committed to energy efficiency more than ten years ago, and from what started as an obligation, it turned out to be one of the most successful and innovative approaches of the group. From 2005 to 2016 Hera delivered 205 energy-saving projects in the industrial sector for a total savings of 364,000 toe[i], which is equal to the annual electricity and gas consumption of 256,000 families. In December 2014 the Group obtained the ISO 50001 certification[ii] for seven of its companies[iii], thus strengthening its already solid commitment to energy efficiency. 

From obligation…

As gas and electricity distributor, Hera is obliged under the Italian White Certificate (WhC) scheme to meet pre-defined annual energy savings target since 2005[iv]. The company decided to fulfill these obligations by originating WhC through energy efficiency projects, rather than purchase them from third parties, a path that is not common among utilities.

Hera started the journey to meet its requirement by implementing energy savings projects at its own facilities. Measures included, among others, efficiency improvements for treatment plants, innovative solutions for public lighting, and decompression of natural gas, for a total of 94 internal projects and total savings amounting at 82,015 toe from 2005 to 2016[v]. 

… to business opportunity

Building on the internal experience on energy savings projects in combination with WhC, Hera decided to use its extensive technical know-how and make it available for the industrial operators outside the company. Today Hera provides a complete package of energy services that include energy audits, identification of energy saving opportunities, application for the WhC, project development, and energy data monitoring on a no-fee basis. Once identified the energy saving project, Hera enters into an agreement with the industrial partner about the company’s role, type of support or service offered, the cost, and the WhC revenues sharing. Every agreement is different and depends on the size and complexity of the project. Consequently, Hera assumes all the risks and the costs until the energy saving project is developed and bankable[vi].

Hera leverages the expertise of the industrial partner through its participation during the entire process, from opportunities identification to project development. Furthermore, the company maintains a network of consultants and technological partners to make sure to deliver the best-customized solution that maximizes savings.

From 2005 to 2016 Hera delivered 111 energy saving projects with external companies across numerous industrial sectors from food processing, textile ceramic, plastic & metal, manufacturing, and chemical industry, obtaining energy savings in the amount of 282,317 toe[vii]. Project interventions included, among others, cooking/drying, furnace, heat recovery systems, upgrading of refrigeration systems, mechanical vapour recompression, advanced control systems, and global process optimization. The following chart illustrates some examples of the projects Hera implemented during 2016.

Attractive payback period

The majority of energy efficiency interventions that Hera identifies have a payback period below 5 years, thus making the projects more appealing for industrial companies. This is made possible by the additional revenues from the WhC, which significantly reduces the payback period.

Obliged parties are granted a fixed annual tariff contribution to cover part of the costs incurred to achieve their energy efficiency quota. This is a great advantage for Hera, as the company is not affected by the market risk from trading the WhC on the spot market, allowing Hera to provide guaranteed energy savings and risk-free access to WhC incentives to the external industrial operators.

The following case study shows how the discounted payback period is reduced to 3 years thanks to the use of WhC, compared to 6 years without the incentive.  

Transferring internal know-how and building trust

A great example of how Hera transferred its internal know-how is reflected in a project they implemented to increase the efficiency of biological oxidation blowers of the wastewater treatment plant connected to the sugar refinery of the Zuccherificio COPROB (Pontelongo, Italy). Hera had extensive internal competence in the optimization of their wastewater treatment plants and was able to transfer it to the external company. From the mandatory energy audit of 2015, Hera identified the energy savings potential and was able to present the project under the WhC scheme in 2017. This not only shows Hera’s technical proficiencies but also its capability to build trust with the industrial partner. Hera has a great relationship with the Zuccherificio COPROB and extreme trust, having presented four successfully approved WhC projects with them. 

Considerations

Delivering energy efficiency in industry in an attractive and cost-effective way is possible and proven. The Hera Group, an obliged party under the Italian WhC scheme to meet annual energy savings, has implemented several projects and delivered concrete savings since 2005. The WhC scheme has definitely played a key role in mobilizing the industry and allowing the design of bankable energy savings projects. Hera, with its strong commitment to energy efficiency, has turned this obligation into an innovative and successful business strategy, by capitalising its internal know-how and exporting it to the external industrial partners.

Energy efficiency is a win-win situation for all the actors involved, and with the great amount of energy savings potential in the industrial sector, we certainly need more companies like Hera. 

Related articles - utilities

More from Silvia Zinetti

Best ideas for Energy Efficiency

Sign up for our monthly newsletter and stay connected to the best ideas in energy efficiency finance, -managment, -recovery, -IoT, -blockchain, - Virtual Reality

Sources
[i]
 Tonne(s) of oil equivalent, abbreviated as toe, is a normalized unit of energy. By convention it is equivalent to the approximate amount of energy that can be extracted from one tonne of crude oil. It is a standardized unit, assigned a net calorific value of 41 868 kilojoules/kg and may be used to compare the energy from different sources. http://ec.europa.eu/eurostat/statistics-explained/index.php/Glossary:Tonnes_of_oil_equivalent_%28toe%29

[ii] ISO 50001 is an International Standard for Energy Management Systems that supports organizations in all sectors to use energy more efficiently, through the development of an energy management system (EnMS) https://www.iso.org/iso-50001-energy-management.html

[iii] Hera Spa, AcegasApsAmga, Marche Multiservizi, Hera Servizi Energia, Sinergie and Hera Luce

[iv] The electricity and natural-gas distributors with more than 50.000 customers are required to achieve yearly quantitative primary-energy saving targets, expressed in toe saved. WC title certifies that a certain reduction of energy consumption has been obtained (1 WhC = 1 saved toe (tonne of oil equivalent); 1 WhC = 100€ (originally, they are tradable) (Source: GSE)

[v] Valore all’energia, 3° edizione, dati 2016, Hera Group (p.3)

[vi]http://eng.gruppohera.it/group/business_activities/business_energy/energy_efficiency/white_certificates/white_certificates_what_does/

[vii] Valore all’energia, 3° edizione, dati 2016, Hera Group (p.3)

About the Author

Silvia Zinetti is a sustainable energy expert and policy advisor, based in Washington D.C.. Previously she worked as a consultant in Brussels, working on various aspects of sustainable energy.