Québec, Canada

Designing a Super Energy Service Company (ESCO) for the Municipal Sector

EXPERTISE : , Energy Performance Contracting /Start-up assistance to ESCOs, Policy and Institutional and Regulatory Frameworks
SECTOR : , Public

CLIENT

Fédération québécoise des municipalités (Quebec Federation of Municipalities or FQM)

 

BACKGROUND

The FQM showed interest in undertaking an initiative to offer a complete set of service and financing options for eliminating all the barriers to implementing energy efficiency (EE) projects at municipal facilities across the province of Quebec, especially such barriers as the municipalities’ lack of adapted financing and limited resources in terms of easy access to both capital and the expertise for identifying the measures to be adopted. The initiative had to be structured on the basis of a fund of financing accessible to the municipalities across Quebec, in collaboration with the FQM, which would serve as the link with the municipalities by paying special attention to their needs and interests.

The goal of this initiative was to speed up the adoption of EE measures at various types of municipal facilities across Quebec by offering a complete program that would bring together the expertise, financing and use of market forces and create advantageous conditions adapted to this sector’s needs. This initiative was in line with the mission of the FQM and the Transition énergétique Québec (TEQ) Master Plan of Transition, Innovation and Energy Efficiency for the Province of Quebec 2018-2023.

The service offer to be made to the municipalities as part of the proposed program had to be based on not only some well-known and proven concepts, such as the energy performance contract (EPC) but also a participatory approach using the dynamic forces in the market, including the energy service companies (ESCOs).

ASSIGNMENT

The FQM hired Econoler to make a market study and review the regulatory framework to help determine the feasibility and the parameters of the proposed initiative and then start developing the detailed design of this initiative. More specifically, Econoler carried out the following activities:

  • Conducting a market study to estimate the needs and amount of financing required.
  • Supporting the review of the regulatory framework to identify the legal perimeter applicable to municipalities regarding such an initiative and the evaluation of the following elements:
    • The potential impact of an EPC on the municipal debt.
    • The legal mechanisms allowing for releasing calls for bids in the context of a Super ESCO.
  • Developing the detailed design of the program to develop the structure and the modalities of the program and determining:
    • The structure of financing to be created, including the cost of financing (the interest rate).
    • The eligibility criteria for municipalities and their buildings.
    • The main elements of various options that may be offered to municipalities.
    • The contractual relations between various parties (the fund of financing, the FQM, the ESCO, municipalities and other actors).
    • The marketing strategy.
    • The transaction costs applicable to various types of transactions (single municipalities, regional county municipalities [MRC], a group of municipalities or thematic clustering [arenas, pools, etc.])
    • The needs in human resources for implementing the initiative (the fund, the FQM, and the municipalities).
    • The operating costs for the fund, for the FQM and, where necessary, for the other actors.
    • The financial return for various actors.
    • The need in grants (if applicable).

The completion of this assignment allowed the FQM to present this opportunity to the Ministry of Municipal Affairs and Housing and the TEQ to request for the regulatory adjustments needed to allow for implementing this initiative.

Return to search