Summary Report 1 Jalel - E For Printing

Summary of International Experience in ESCO Industry
and Recommendations for the Comprehensive Survey

of the ESCO Sector

Assessment of the Status of Emerging Energy Service Industry in Vietnam and
Capacity Building Needs of Key Market Players

Jalel Chabchoub, International Consultant

March, 2013
Assessment of the Status of Emerging Energy Service Industry in Vietnam
and Capacity Building Needs of Key Market Players

ii
ACRONYMS
ABESCO Associao Brasileira das Empresas de Servios de Conservao de
Energia
BOOT Build,Operate,Own and Transfer
CDM Clean Development Mechanism
CCHP Combined Cooling, Heat and Power
CHP Combined heat and power
EBRD European Bank for Reconstruction and Development
ECC Energy Conservation Center
EE Energy efficiency
EEO Energy Efficiency Office
EESP Energy efficiency service provider
EMCA ESCO Committee of China Energy Conservation Association
EPC Energy performance contract
ESC Energy Services Contract
ESCO Energy services company
GEF Global Environment Facility
GS Guaranteed Saving
HCMC Ho Chi Minh City
ICPEEB Indian Council for Promotion of Energy Efficiency Business
IFI International financial institution
JAECSO Japan Association of Energy Services Companies
KAESCO Korean Association for ESCOs
KfW Kreditanstalt fr Wiederaufbau
LGF Loan Guarantee Fund
PPN Performance Partners Network
SAAEs South African Association of Energy Services Companies
SS Shared Saving
TPF Third party financing
USAID United States Agency for International Development
WB World Bank


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TABLE OF CONTENTS

1 INTRODUCTION ................................................................................................................... 1
2 BRIEF SUMMARY OF INTERNATIONAL EXPERIENCE ..................................................... 2
3 DESK REVIEW .................................................................................................................... 14
4 ASPECTS TO BE CLARIFIED FURTHER BY THE QUESTIONNAIRE .............................. 17
APPENDIX I : QUESTIONNAIRE OUTLINE ............................................................................... 19
APPENDIX II : LIST OF REPORTS ............................................................................................. 21

LIST OF TABLES
Table 1: ESCO Status in some Developing Countries ..................................................................... 2
Table 2: Most Frequent Barriers and Possible Solutions ................................................................. 4
Table 3: Key Features of EU Member States ESCO Market ........................................................... 8
Table 4: Best Practices for Development of ESCO Industry .......................................................... 10


1
1 INTRODUCTION
The objective of this consultancy assignment is to assess the current status of the emerging
EESP/ESCO in Vietnam and determine the training and capacity-building needs of key players in
this sector.
The assignment will involve a comprehensive assessment of capacities of the existing
EESP/ESCO followed by a thorough assessment of the needs of key market players for training
and capacity building.
This summary report contains two main sections, the first one including a brief summary of relevant
international experience for ESCO market development and the second providing suggestions for
further investigation for data and information collection..

2
2 BRIEF SUMMARY OF INTERNATIONAL EXPERIENCE
The ESCO industry has spread to most developed countries, several countries in transition and the
biggest developing countries with different success levels based on market development
strategies, existing opportunities and barriers that the ESCO industry is facing in each local
context.
1

In developing countries, a large number of programs and mechanisms have been developed to
facilitate the growth of ESCOs. Programs by international agencies, notably the World Bank (WB),
the European Bank for Reconstruction and Development (EBRD), the United States Agency for
International Development (USAID) and KfW, helped many countries to develop an ESCO market,
as shown in the following table.
Table 1: ESCO Status in some Developing Countries
2

Country
Number
of
ESCOs
Number of
Projects
Total Investment
(USD)
Main Assistance
Received
ESCO
Association
China
Over 400
with 50
60 core
1,426 since
1998
$260 million in 2006
$1 billion in 2007
World Bank GEF Yes/EMCA
Brazil 2540 - $40 million in 2008
World Bank Three
Country Energy
Efficiency (3CEE)
project, Domestic
government
Yes/ABESCO
South Korea 125 519 in 2000 $76 million in 2000
Domestic
government
Yes/KAESCO
Thailand 24 - -
World Bank GEF,
Domestic
government
Yes
South Africa 35 - $10 million in 2001 Domestic utility Yes/SAAEs
India 20 - $1 million in 2001
World Bank GEF and
3CEE project,
Domestic
government and
banks, USAID, CDM
Yes/ICPEEB
Mexico 20 - -
US National
Renewable Energy
Laboratory, Domestic
government
-
Kenya 1 - - World Bank GEF No

1 http://www1.ifc.org/wps/wcm/connect/dbaaf8804aabab1c978dd79e0dc67fc6/IFC+EE+ESCOS+Market+Analysis.pdf?MOD=AJPERES
2 www.iisd.org/pdf/2009/bali_2_copenhagen_escos.pdf

3
The support provided mainly included funding for ESCO start-up, ESCO project development and
implementation, partnership development, capacity building and loan guarantees. This support was
crucial to initiate ESCO activities and develop an ESCO market in many developing countries
where development banks, commercial financial institutions and utilities have been involved in
ESCO development. Government support was also an important pillar for the market development
through funding, energy policy elaboration and enforcement, and implementation of demonstration
programs.
The focus of ESCOs varies from country to country and covers different sectors although, in
general, the public and the industrial sector are the most important clients and drivers for the
ESCOs, while the residential sector is not presenting a recurrent target for energy performance
contracts (EPCs). In industrialized countries, the ESCO activities portfolio usually focuses on the
public sector, where many ESCOs are created from utilities and large multinational manufacturing
firms, thereby enabling them to receive financing more easily. In developing countries, ESCOs
often target the industrial sector due to limited access to the public sector where usually the main
barriers are circumscribed in the limited funds of public administrations and the inflexible
procurement rules for EPCs.
The international experience
3
for program implementation and mechanism development to
facilitate the growth of the ESCOs market demonstrates moderate success in most developing
countries except in China, where the ESCO market realized a significant jump through the
WB/GEF project and EMCA support. The technical assistance services to emerging and potential
ESCOs provided by EMCA combined with loan guarantee facility induced a rapid increase in
ESCOs, where the number increased from 59 in 2003 to 560 in 2010.
However, for many other developing countries, the ESCO markets are still in their infancy stage
where a number of barriers hinder ESCO expansion. Usually barriers are interrelated and often
need mitigation strategies on different levels to overcome barriers that prevent the development of
the ESCO market. The most common barrier is principally administrative for implementing ESCO
projects in the public sector, otherwise a lack of awareness on the demand side, a lack of financing
mechanisms and a lack of legislation to support EPC development and reduce uncertainty and
foreseen risk. The above common barriers are met in many countries, while some others are linked
to country specificities.
The table below summarizes the most important barriers and possible solutions.

3 http://www.giz.de/Themen/en/dokumente/en-International-Experience-Developing-ESCO-Markets.pdf

4
Table 2: Most Frequent Barriers and Possible Solutions
4

Barrier Sector Reasons Example Possible Solutions
Insufficient levels of information
and awareness of EPCs and their
opportunities
All
Potential clients and many financial
institutions are unfamiliar with the
principles of EPCs
All countries
Information and demonstration programs, training
on financial facilities, model contracts, energy
agencies
Low share of energy
expenditures in total income,
resulting in low interest by
customers
All
Low energy prices or low
consumption, customers such as
companies can implement
improvements on their own
All countries
Information and demonstration programs, energy
efficiency obligation
Several projects compete for
scarce capital, therefore low
interest in EPC
All, mainly
industrial
Higher expected turnover if amount
invested in other projects
Many
Information and ddemonstration programs, energy
efficiency obligation
High pperceived technical and
business risk by clients
All and banks
Fear of losing jobs, fear about trade
secrets, not understanding/trusting
the payback scheme of EE, end-use
EE projects often non-asset based,
so collateral is hard to obtain
All countries, e.g.,
Germany
Information and demonstration programs,
accreditation system, standardization of contract
procedures
Lack of ccredibility of ESCOs All
Poor early experiences, many free-
riders
E.g., Sweden,
Poland, Italy
Accreditation system
Lack of cconfidence and trust in
ESCOs
All
Customers are suspicious of the
win-win solution, dont believe in
success of saving measures
All
Accreditation system, standardization of contract
procedures, M&V protocols

4 An Assessment of on Energy Service Companies (ESCOs) Worldwide, ADME & WEC, 2007

5
Banks not willing to lend for EPCs All
Conservative lending practices and
limited experience with EE project
financing, asset-based lending
practices versus cash-flow-based
financing suitable for EE projects, not
familiar with EPCs or considered as
too risky (credit risk)
Mainly countries
with conservative
banking system
Demonstration projects, training, grants,
concessional loans, credit facilities, guarantee
schemes provided by the state or IFIs, technical
assistance, guarantee facilities
ESCOs not interested in small
projects
Residential, but
also other sectors
Transaction costs high (i.e., profit is
too low and risky)
Developing
countries,
residential (most
countries)
Guarantee fund, pooling, combination with state
support schemes
Principal/agent problem: investor
different from beneficiary of
savings
Residential,
hospitals, schools
Split incentives between landlord and
tenant, municipal or institutional
budget units, etc.
Germany,
Hungary, all
Enabling public procurement legislation,
progressive rental and leasing contract
arrangements
Financing problem: ESCOs have
insufficient internal funds and do
not have access to grants
All Especially small new ESCOs
Mainly developing
countries: China,
India
Guarantee fund if high perceived risk, loan
schemes, preferential loan schemes
Lack of credit ratings among
some consumer groups
SMEs, public
institutions
Poor balance sheets of SMEs, cash
transactions prevalent in many
SMEs, potential clients like public
institutions may not be creditworthy
India International support
Unfavorable procurement rules Public
Rules and/or procedures difficult to
understand, procurement rules not
reflecting the specifics of EE
investments (focusing on initial
lowest cost rather than lifecycle), no
green procurement
Germany,
Hungary, India
Change in procurement law/policy
No incentive for EPCs due to
subsidized energy prices
All Varied energy mix, political reasons
Mainly developing
countries
Privatization of energy sector, gradual phase-out
of subsidies

6
Short payback times required by
customers
Industrial

Germany, USA Mandatory energy audits
High transaction costs relative to
profit
Mainly residential

Many
Bundling of buildings/similar projects, leveraging
the benefits of programmatic CDM
Low level of data collection, no
baseline data available
All
High transaction costs and long
preparation time
Hungary,
developing
countries
Systematic collection of consumption data (which
is useful for many other reasons)
Inadequate energy service levels Residential, public
Comfort standards not met prior to
intervention (e.g., under-heated or
under-lit rooms), which makes the
construction of baselines difficult and
inevitably results in some savings
being absorbed to reach acceptable
comfort levels
Bulgaria,
developing
countries
Combination of EPCs with other renovation efforts
Lack of government leadership
on EE
All
Other priorities, possibly conflict with
other policies
India
Initiate exemplary retrofits in public sector,
introduce general EE policies, EN standards,
mandatory energy audits
Unfavorable tax regimes All
E.g., VAT on investments and
equipment is higher than on energy
prices
Germany Changes in the tax regimes
Political and economic
uncertainty
All
Volatile energy prices, ownership
structures, unpredictable business
environment, changing regulations
Mainly developing
countries,
countries in
transition

Shortage of qualified staff and
equipment for ESCOs
All
Insufficient high-quality education,
highly qualified young people move
to other countries
Mainly developing
countries, India
Education programs, training, ESCO association

7
It is important to analyze countries' successful experiences with the well-developed ESCOs in the
world and benefit from their experience and lessons learned. However specific country conditions
and specificities should be taken into account to assure a good start for EPCs and test concepts
and solutions through demonstration and pilot projects. A lack of planning and strategy will delay
further market development and induce additional barriers for ESCO establishment.
In the EU
5
, the development of an ESCO industry is boosted by, among other factors, the climate
and energy policy targets for reduction of energy consumption by 20 percent of the projected 2020
levels through energy efficiency improvements. Also, looking at the well-developed ESCO market
in Europe, notably Germany, France and Austria, the success factors which has been effective for
the development of the EPC market could be summarized as follow:
Establishment of an ESCO association,
Establishment of an ESCO accreditation system,
Standardization of contracts and M&V procedures,
Creation of a suitable regulatory and policy framework,
Support for measures by national or local energy agencies.

5
http://publications.jrc.ec.europa.eu/repository/bitstream/111111111/15108/1/jrc59863%20real%20final%20esco%20repor
t%202010.pdf

8
Table 3: Key Features of EU Member States ESCO Market
6

Country
Market size
( turnover/
year)
No. of
ESCOs
Types of ESCOs
Measures
most often
implemented
Contract
types
Sectors
Germany 1.72.4 billion 250500 -
Heating
Insulation
CHP
ESC (GS, SS)
EPC (GS, SS)
BOOT
Public buildings
Private
buildings
France 45 billion
10 big
and 100
smaller
actors
Facility management
and operation
companies,
manufacturers of
building automation &
control systems
HVAC
Street lighting
Compressed air
production
systems
Heating
Public buildings
Private non-
residential
buildings
UK 400 million 20
Subsidiaries of large
international
manufacturers of
control systems, and
energy service and
supply companies
Lighting HVAC
Plant
Replacement
Decentralized
boilers and
controls
CHP
EPC
Industry
Commercial
and public
sector
Italy
387 million (in
2009)
50
Very diverse.
Subsidiaries of large
international
companies and SMEs
CHP
Public lighting
Control
Renewable
energy
Heating
Public sector
Industry
Residential
sector
Spain > 100 million > 15
National and
international large
utilities, construction
and multiservice
companies
CHP
CCHP
Street lighting
Solar-thermal
Wind
PV
SS
BOOT
Chauffage
Public sector
Private non-
residential
buildings
Industry
Austria 1015 million 514
Energy service &
supply companies,
consultancy and
engineering firms
Heating Cooling
Lighting
Water
management
SS
Public buildings
Private
buildings
Belgium N.A. 1317
Large international
manufacturers of
control systems (1
public, 7 large and 5-
7 small ESCOs)
Insulation
Lighting
HVAC
Customer
financing
ESCO-based
funding
Leasing
Public sector
Industry
Sweden 6080 million 510
International medium-
sized, manufacturers
of building automation
& control systems
Improved control
systems
Ventilation Heat
recovery
TPF
Receivable
Financing
Public buildings
Nether-
lands
N.A. 50
Energy services,
construction and
engineering
companies
Street lighting
Large building
renovations
Grants
Preferential
loans
Public sector
Municipal

6 http://igitur-archive.library.uu.nl/student-theses/2013-0212-
200435/Afstudeerscriptie%20definitieve%20versie%20(PUBLIEK)%20-%20Roel%20Vreeken.pdf

9
Asian ESCO market development varies from country to country. Other than the successful case in
China, ESCO markets have formed to some degree in Japan, India and Thailand. In other
countries, such as Malaysia and the Philippines, the government has introduced an ESCO
concept, but markets have not yet been developed. Initial measures for promoting ESCO concepts
are assumed to be responsible for such differences in the development of an ESCO industry. For
instance, the successful development of the Japanese ESCO industry is due to strong
governmental support, clear regulations for energy efficiency measures and the establishment of
the Japan Association of Energy Services Companies (JAECSO).
Similarly to China, the Korean ESCO market shows a particularly successful evolution in
comparison to other developing countries. This is attributed to the fact that the South Korean
government became one of the biggest customers for ESCO services and has actively supported
the ESCO programs, similarly to U.S. and Canada.
A Survey of the U.S. ESCO Industry: Market Growth and Development from 2008 to 2011
7
was
completed and shows that the ESCO industry continues to grow, with estimated revenues of
$4.1 billion in 2008, despite a general downturn in the broader economy. Public and institutional
marketsfederal, state and local governments; schools; universities and collegesaccount for
about 84 percent of ESCO industry revenues in 2008 ($3.4 billion). ESCOs reported that energy
efficiency technologies represent a major share of industry activity, accounting for 75 percent of
ESCO industry revenues, or about $3.0 billion, in 2008. Three-quarters of ESCO projects are
performance-based. About 22 percent of those reported as non-performance-based agreements,
such as design/build and engineering, procurement and construction services (EPCS) projects.
The table below summarizes the best practices for ESCO development.

7 http://www.naesco.org/resources/industry/documents/ESCO%20study.pdf

10
Table 4: Best Practices for Development of ESCO Industry
8

Initiative Countries
1
Innovative risk sharing and transfer mechanisms:
Guarantee products partial loan guarantees
A guarantee scheme or other risk mitigating tools may be appropriate
when the financing sector perceives high risk of ESCO projects.
Guarantees are contracts interlocking three parties: lender and
borrower (loan agreement) and guarantor and lender (guarantee
agreement).
Depending on the degree of the guarantor's involvement in the loan
approval process, there are individual guarantees and portfolio
guarantees.
Preferred drawing rights and Energy Savings Insurance
A preferred drawing right agreement or provision is included in the loan
documentation whereby the borrower agrees that the lender is paid
automatically at a defined payment date each payment period (monthly,
quarterly), and this amount is automatically withdrawn from the
borrower's primary bank account.
Energy Savings Insurance (ESI) is a formal insurance contract between
an insurer and either the building owner or the third-party provider of
energy services. The insurer agrees to pay any shortfall in energy
savings below a pre-agreed baseline, less a deductible.
Countries: USA, Canada, China, Brazil, Germany, India
In Brazil, the National Bank for Economic and Social
Development (BNDES), which is the ultimate source for
almost all medium-term commercial bank debt financing in
Brazil, approved an innovative new line of credit called
PROESCO. It was designed to address the problem of
guarantees for loans for EE projects. BNDES shares 80
percent of the loan risk with the financial institution.
In India, the Government has set up a Partial Risk
Guarantee Fund (PRGF) that provides commercial banks
with partial coverage of risk exposure for EE projects loans.
PRGF acts as a first loss, subordinated recovery guarantee
and will be paid out to participating banks in the event of a
loss or default.
ESI is widely used in Canada and in the U.S.; in Europe, the
global market of risk transfer is slowly growing, but
insurance products such as ESI are still limited.
In the U.S., several insurance companies already offer ESI,
which traditionally has been used to guarantee power
reductions at retrofitted buildings.
State governments have led ESI efforts, with several
requiring such insurance from firms that provide energy
management services in state-owned facilities.
2 Establishing bankable ESCO project pipelines / Countries: USA, Canada, India, China, Italy

8 IDC presentation, Feedback to SAAEs, May 2012

11
Demonstration projects
Targeted communication about the profitability of energy efficiency
investments
Programs and technical assistance facilities that build the capacities of
market participants to develop and structure finance for projects, most
notably providing training for feasibility study and business plan
preparation across a range of possible project proponents
In India, the Government is providing resources to prepare
bankable reports studying technical feasibility, project
economics and other critical parameters. Investment-grade
energy audit reports of public buildings, municipalities,
agriculture pumps and SMEs have been prepared using
government grants. The findings of these reports are shared
through various mediums like national workshops and
conference. More than 1,200 projects have been initiated
and are already at various stages of implementation.
3 National ESCO association Countries: USA, Canada, Brazil, China, Japan, UK, Italy
4
Establishment of super ESCOs
A super ESCO is an entity that is established by the Government and:
- Serves as an ESCO for the large untapped public sector (hospitals,
schools, government buildings and other public facilities);
- Supports capacity development and activities of other ESCOs,
facilitates access to project financing;
- May also act as a leasing or financing company to provide EE
equipment to ESCOs and/or customers;
- Provides consultancy services to the private and public sectors in the
areas of energy efficiency, CDM, etc.;
- Leverages multilateral and bi-lateral financing;
- Enters into partnerships and JVs with other implementing partners
like ESCOs, industry, etc. to promote energy efficiency.
Recent World Bank study of public procurement of energy efficiency
services has identified the Super ESCO as a potentially viable model.
Fedesco Belgium
HEPESCO Croatia
EC2 Corporation Philippines
Fakai Company Hebei, China
Energy Efficiency Services Limited (EESL) India
5 Demand Aggregation/Project Bundling
Countries: USA, Canada, India, China, Japan, Germany, Italy,

12
Project bundling allows for the aggregation of individual projects,
technologies, service offers and investments into larger and more
comprehensive lots to achieve sufficient economies of scale. The
literature also suggests that such a framework should be integrated with
mandatory domestic manufacturing for additional cost reductions.
Some of the main drivers for considering this strategy are as follows:
- Reduced transaction cost;
- Avoid adverse effects on the balance sheets of the utility if a single
utility is considered for demand aggregation;
- Significant scope for market transformation and capable of high
value demand aggregation;
- Highly replicable model for promoting energy efficiency.
Australia, UK, Brazil
The Berlin Energy Agency (BEA) in Germany has
successfully pooled over 1,000 public buildings and more
than 500 private properties. BEA conducts the initial energy
audits at no cost to the end-user, and this information is
used for the ESCO procurement. BEA used government
grant funds to pay for these services. On average, 20
buildings were being pooled together for procurement.
The BEA program has been highly successful and is being
replicated in Bulgaria, Romania, Slovenia and Chile. It
demonstrates the power of local government to act as a
market aggregator and procurement agent for EE projects.
6
Accreditation of ESCOs and standardization of services
The accreditation of ESCOs has been referred to as one of the most
effective tools to increase trust in the quality of ESCO work, however it
is not widely used. Several quality labels have been set up for ESCOs
and ESCO services around the globe.
The standardization of common core contractual provisions including
clear frameworks, definitions, measurement and verification standards
(such as the International Performance Measurement & Verification
Protocol), and an accreditation system is essential in order to raise
confidence levels in the market.
Many countries have developed standardized templates for tender
documents and contracts that give a successful procedure protocol for
carrying out parts of or all ESCO operations. Templates and protocols
are usually useful for embryonic markets and for building trust in ESCO
business in general.
Countries: USA, UK, China, Canada
In India, the Bureau of Energy Efficiency (BEE) has initiated
a credit rating program along with CRISIL (a local credit
rating agency) in order to evaluate ESCO resources and
capabilities for implementing large-scale EPC-based energy
efficiency projects in the country.
In Germany, standardization is one of the major factors for
the development of the ESCO industry. Procedures and
models such as contracts, the energy performance
retrofitting model and standard procurement procedures
along with contracting guidelines were developed by the
federal states. Presently, there are about 7 different
contracting models.

13
7
EE focused public procurement laws and mandatory EE targets
Allow the inclusion of energy efficiency in technical tender specifications
and the use of lifecycle costing in public tender specifications.
Clear, practical and ready-to-use guidelines on how to apply energy
efficiency criteria in public procurement procedures are required in
order to improve the practical implementation of energy-efficient public
procurement.
Regulatory frameworks with mandatory energy efficiency targets can
create demand for energy audits and energy efficiency investments,
and raise the awareness of energy efficiency measures, thereby
lowering investment risks. Such mandatory targets may also be
accompanied with incentive mechanisms to encourage compliance.
Countries: Italy, Germany and UK
Italian white certificate scheme. The command and control
component of the scheme was the public service obligation
imposed upon the electricity and natural gas distributors.
Trading of certificates on the secondary market was
encouraged to generate secondary revenues and reduce
the cost of energy conservation measures.

14
3 DESK REVIEW
The latest documents transmitted by the MOIT activities related to ESCO and EPC market
development do not include detailed data and information about the companies' composition,
organization and activities related to energy efficiency project development and implementation.
The review of the documents brought a better understanding of the performed activities related to
energy efficiency projects, the project development status and the implementation by EESP/ESCO
present in the market and also the existing limitations and barriers that need to be mitigated in
order to provide a better environment and conditions for EPC development. Further investigation
need to be undertake based on the identified preliminary indicators to assess more in depth the
status-quo of EESP/ESCO activities. The main conclusions that could be drawn from the review of
main documents could be summarized as follows:
Report on Lessons Learned from the project Promoting Energy Conservation in Small and
Medium Enterprises (Godefroy Grosjean, 2010). The report does not include specific data
and information about the EESP/ESCO but did mention some recommendations about
further training and capacity building. The main milestones could be summarized as follow:
- Communication and Awareness: better empowering of the EESPs and provision of better
tailored support for the communication campaigns and communication materials might be
needed to strengthen their contribution in the energy efficiency project implementation.
- Technical Capacity Development: financial knowledge and risk assessments for SMEs
and ESSP need to be strengthened.
- EESP Training: EESPs have implemented most of the 500 EE projects implemented in
five industrial sectors with the participation of 25 EESPs. However, it should be noted that
only three projects have been implemented under the EPC concept. No ESCO requested
support from the Loan Guarantee Fund (LGF). The low number of projects implemented
reflects the current ESCO situation in Vietnam and reveals the barriers and challenges
involved in market development.
- Technical support provided helped in developing high-quality and sustainable energy
service providers in Vietnam.
- Needs Assessment: in-depth assessment is needed to provide an accurate trigger to the
EESPs. It is recommended to discuss extensively with the EESPs to identify exactly the
areas where they have knowledge gaps.
- Emphasize on developing financial skills: ensure that EESPs receive the right training to
support clients effectively for investments and financial aspects.
- EC Services Market Transformation: empower EESPs to strengthen their ability to stand
on their own feet at the end of the project.
- New Business Model: develop EPC and the appropriate legal support.
- Only 3 ESSPs have been interviewed.
Preparation of Strategy and Action Plan for ESCO Industry Development in Vietnam
(Econoler 2011): The report consists in the preparation of a strategic development program
for the ESCO industry in Vietnam with a proposed preliminary action plan. Despite the
emphasis on capacity building and training, the report does not provide specific information
or assessment of the ESCO/EESP capacities and skills. Nevertheless , it proposes an action

15
plan to promote and create a sustainable ESCO market with three main components as
follows:
- The first component recommended the development of a supporting program to provide
necessary support and address all potential barriers to developing the ESCO market. The
program component includes an awareness raising campaign within the public and private
sectors with the development of adequate development funds for EE projects. It includes
notably a capacity building and support sub-components. These components propose
training for MOIT, Energy Efficiency Office (EEO) and Energy Conservation Centers
(ECC); advise private companies on ESCO start up and activities development, support
the development of projects and create success stories through pilot project
implementations. The component also advises on the development of a sustainable
financing mechanism and supports ESCO development by removing barriers and
establishing an ESCO association.
- The second component proposed the development of a sustainable market through public
sector facilities through the building of an energy efficiency promotion plan, the
identification of the energy efficiency potential and pilot project implementation, the
creation of a database on public building energy consumption patterns and select of some
ESCOs for pilot projects implementation.
- The third component suggested the development of an ESCO methodology, EPC
templates and the implementation of an M&V procedure.
Upgrading the Capacity of Existing Energy Conservation Centers (International Institute for
Energy Conservation, 2009). The report made an assessment of the existing energy
conservation centers in Hanoi and Ho Chi Minh City (HCMC) with regard to their human
resource capability, technical capability, expertise, and experience in providing energy
services to customers and acting as ESCOs. Even though the report focuses on energy
conservation centers, it reflects the current status of knowledge, experience, capacities and
the market's need toward the development of a sustainable ESCO market. The report
identified the technical, organizational and human resources gaps that need to be filled to
bring each of these centers to the level of an independent ESCO. The report states that both
of the ECCs have very good skills and capabilities with respect to understanding energy end
uses, energy audits and detailed energy audits. Also, both have good skills and capabilities
in the economic and financial analysis of EE measures. In order to successfully transition to
a full service ESCO business, the ECCs will need to substantially strengthen their
knowledge, skills and experience in ESCO project development, marketing, sales, financial
and business management systems, customer service, legal and contracting. The major
identified areas for strengthening and upgrading the capacity of the ECCs include notably:
- Building marketing capacity: the ECCs needs to establish a marketing and sales
department that will be responsible for these functions. The staff of this department should
have a formal background in marketing, communication or related fields. In addition, the
ECCs needs to establish a Performance Partners Network (PPN) which is a consortium of
independent companies that help the ESCO offer specialized value-added capabilities
that aid in the delivery of energy services.

16
- Developing a strong sales force and sales process: the ECCs need to establish a sales
department or unit with the appropriate knowledge and skills relevant to energy services.
The sales personnel must be able to work closely with the technical, financial and
administrative/contracting personnel within the ECCs
- Providing and arranging financing: the ECCs need to develop the skills and capabilities to
arrange project financing for energy efficiency projects.
- Measurement and verification: the ECCs need to consider carefully the level of accuracy
of the M&V versus the cost of achieving that accuracy.
- Creating an ESCO business plan: the ECCs should develop a business plan to define the
business purpose, strategy and operational plan that will be adopted by top management
and communicate it to all staff.
- Contracts and agreements: the ECCs should understand specific ESCO operation related
to project development steps, contracts and agreements with consumers.

17
4 ASPECTS TO BE CLARIFIED BY FURTHER
INVESTIGATION
The information to be gathered should provide answers about the current status, barriers,
constraints, perspective, needs and priorities of the following:
Legal status: title, legal status, address and contact, history of development
Human resource capacity: number of staff, education levels, foreign language capacities,
experience with energy efficiency project implementation, training certificates, energy
auditing certificates, staffs detailed experience and professional skills related to energy
efficiencyenergy audit, benchmarking, solution design, etc.
Infrastructure: owned/rented working space, working conditions, availability of measuring
equipment for energy efficiency service
Organization: ownership management structure, quality certification, project management
structure
Services and products provided, and customers and markets: quantity of and details about
services and products provided in recent years, number of EPCs done and details, number
of customers overall and by sectors, project management capacity, firms assessment on
energy efficiency service market potentialspotential customers, market volume, market
development barriers, etc.
Business management and development: availability of business/market development
strategy, availability of plan for business trademark/image
development Organization of the strategy/plan implementation, constraints to business
development, what policies or conditions could help remove the constraints
Employment: recruitment procedures and regime, forms of labour contracts/regimes,
remuneration and incentives, employee mobility
EESP trade promotion: desire and willingness to be part of a network whose sole purpose is
to promote the growth of EESPs, what services are expected from such a network-enabling
environment
Fund arrangement for business: capital from investors, loans, grants, other financial
instruments and sources
To this end, the exploration should lead to a good understanding of the current situation related to
the ESCO business so that the collected information and data permit drawing a complete picture
of ESCO activities and barriers.
It should also be noted that investigation should include EESP/ESCO and other players to assess
all factors related to ESCO operations and EPC projects development and implementation. The
assessment outpt is to provide recommendations on training and capacity-building, and identify the
capacity gaps/barriers to their involvement in EPCs. The proposed training/capacity-building
should answer to the most extent the identified needs and requests.

18
In this regard details about the ESCO's technical, financial and background knowledge and
capacities, as well as EPC concept and specificities need to be collected. The emphasis should be
done notably on:
Revenues related to EE, EPC and others
Activities related to EE, EPC and others
Energy efficiency in general and efficient technologies
Knowledge about ESCO business and ESCO project development
Investment-grade audit development
Human resources background and capacities
Knowledge about EPC and contract negotiation
Risk assessment
Project financial analysis
ESCO business plan
Opportunities for EE and EPC
Potential energy efficiency projects by sector
Available incentives and benefits for EE projects
Available financing mechanisms for EE projects
Queries should permit to ESCOs to freely express their point of view about market barriers and
needs for support and capacity-building. The expected feedback should cover notably:
Barriers for project development
Barriers for project implementation
Firm's requirement for ESCO knowledge reinforcement
Financial capacity
Financial analysis
Financing mechanisms
Technical support
Recommendations for ESCO development
Appendix 1 includes outlines for questionnaire development..

19
APPENDIX I :
QUESTIONNAIRE OUTLINE
This outline could be used as guidance to draft a preliminary questionnaire. Each of the sections
need to be developed to include appropriate questions to collected from the EESP/ESCO relevant
information..
Section 1: Organization information
General information: title, legal status, addresses and contacts, history of development,
capital, ownership/shareholders, number of employees, branches, etc.
Section 2: Activities and revenues
Activities and revenues by market segments and service/product type (municipal,
government buildings, education, health, commercial, industrial, other)
Revenues from various types of services (e.g., energy efficiency, renewable energy projects,
CHP, design/build and EPCS, etc.
Projected growth in annual revenues for each sector/service for the next 5 years
Etc.
Section 3: Human resources and capacities
Departments/units, number of staff, education levels, foreign language capacities,
experience with energy efficiency project implementation, experience with EE project
development and implementation.
Section 4: Organization activities
ESCO services and products provided, targeted customers and marketsquantity of and
details about services and, products provided in recent years, number of EPCs done and
details, number of customers overall and by sectors
ESCO structure and organization
ESCO business plan
Financial instruments and sources
Project completed / technologies installed by ESCO (energy efficiency, RE, consulting)
Types of contractual arrangements
- Performance agreement EPCs (GS, SS, chauffage
- Non-performance-based agreements, design/build and EPCS
- Consulting services
The ESCO's perceived trends in project investment, levels and savings
Project viability evaluation (simple payback time, IRR, NPV, etc.)
Risk evaluation
Interest in developing (more) ESCO business
Etc.

20
ESCO market potential:
The firms assessment on energy efficiency service market potentials: potential sectors,
customers, market volume, technologies, etc.
Section 5: Training and capacity building
Training strategy, annual budget, number of participants, types of training, number of
certified resources, types of certification, etc.
Section 6: Measurement equipment
Type of measurement equipment, accuracy, calibration, M&V, certification, dedicated
resources, etc.
Section 7: Firm internal barriers for ESCO project development and implementation
Constraints to ESCO business development: all limitations and barriers
Section 8: Market barriers for ESCO project development and implementation
Questions about the business environment policy/regulations on EESP here (tax calculation,
any legal/policy risks related to EPC, for example ownership of EPC assets at factories, and
expectation of EESP regarding these issues/risks.
Section 9: Needs for support and capacity building
Open section
Section 10: Recommendations for ESCO and EPC development
Open section


21
APPENDIX II :
LIST OF REPORTS
1. IFC Energy Service Company Market Analysis:
http://www1.ifc.org/wps/wcm/connect/dbaaf8804aabab1c978dd79e0dc67fc6/IFC+EE+ESCOS+Ma
rket+Analysis.pdf?MOD=AJPERES
2. Energy Services Companies in Dvelopping Countries:
www.iisd.org/pdf/2009/bali_2_copenhagen_escos.pdf
3. GTZ-International-Experience-Developing-ESCO-Markets:
http://www.giz.de/Themen/en/dokumente/en-International-Experience-Developing-ESCO-
Markets.pdf
4. Latest Development of Energy Service Companies across Europe:
http://bookshop.europa.eu/en/latest-development-of-energy-service-companies-across-europe-
pbLBNA22927/downloads/LB-NA-22927-EN-
C/LBNA22927ENC_002.pdf;pgid=y8dIS7GUWMdSR0EAlMEUUsWb0000rMXCfSeG;sid=B1iEmLy
Gc1uErezknjkaP96jSjua6vHlGSo=?FileName=LBNA22927ENC_002.pdf&SKU=LBNA22927ENC_
PDF&CatalogueNumber=LB-NA-22927-EN-C
5. Energy Service Companies Market in Europe:
http://publications.jrc.ec.europa.eu/repository/bitstream/111111111/15108/1/jrc59863%20real%20fi
nal%20esco%20report%202010.pdf
6. Netherlands ESCO Market:
http://igitur-archive.library.uu.nl/student-theses/2013-0212-
200435/Afstudeerscriptie%20definitieve%20versie%20(PUBLIEK)%20-%20Roel%20Vreeken.pdf
7. A Survey of the U.S. ESCO Industry: Market Growth and Development from 2008 to 2011:
http://www.naesco.org/resources/industry/documents/ESCO%20study.pdf


22
Clean Production and Energy Efficiency Project
Rm. 502, Building A, 54 Hai Ba Trung, Hoan Kiem Dist., Hanoi, Vietnam
Tel/Fax: +84(4) 3938 7835
Email: vn.cpee@gmail.com
Website: http://cpee.vn

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