Environmental-Economic Report on Energy Efficiency in Malta's Industry - November 2017

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Investing in Energy Project - An Environmental-Economic Report on the Implementation of Energy Efficiency Measures by Industry

Authored by: Bernard Mallia Reviewed by: Diana Spiteri Reece Delia

Equinox Advisory Ltd, 36 Archbishop Street, Valletta VLT 1447, Malta (+356) 2137 6242

(+356) 9940 3204

http://www.equinoxadvisory.com

info@equinoxadvisory.com

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Investing in Energy Project - An Environmental-Economic Report on the Implementation of Energy Efficiency Measures by Industry

Table of Contents

1.1

Table of Contents ............................................................................................................. 2

1.2

List of Tables .................................................................................................................... 3

1.3

List of Figures .................................................................................................................. 3

2.

Introductory Letter & Disclaimer ............................................................................................ 5

3.

List of Acronyms Used throughout the Study ......................................................................... 8

4.

Executive Summary............................................................................................................... 10

5.

6.

4.1

Methodology .................................................................................................................. 12

4.2

Main Findings ................................................................................................................ 13

Introduction ........................................................................................................................... 16 5.1

The Investing in Energy Project ..................................................................................... 17

5.2

The Investing in Water Project....................................................................................... 18

5.3

Energy Efficiency Measures within the European Union .............................................. 19

5.4

Report Structure ............................................................................................................. 23

5.5

Data on the Study Owner ............................................................................................... 24

5.6

Authors of the Study ...................................................................................................... 24

The General Context .............................................................................................................. 25 6.1

The EU Backdrop ........................................................................................................... 26

6.2

Regulatory Context ........................................................................................................ 29

6.2.1

EU Regulatory Context ........................................................................................... 29

6.2.2

The Local Regulatory Context (Section Authored by the MBB) ........................... 37

6.3

Macroeconomic Context ................................................................................................ 44

6.4

Policy Context ................................................................................................................ 49

6.4.1 7.

8.

Malta’s National Energy Efficiency Action Plan ................................................... 52

Economics Analysis .............................................................................................................. 56 7.1

Methodology of the Economics Analysis ...................................................................... 57

7.2

The Results ..................................................................................................................... 59

7.2.1

Cost Savings and External Benefits ........................................................................ 64

7.2.2

Energy Savings ....................................................................................................... 82

7.2.3

Company Premises.................................................................................................. 86

Conclusion ............................................................................................................................. 97

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Investing in Energy Project - An Environmental-Economic Report on the Implementation of Energy Efficiency Measures by Industry

References ........................................................................................................................... 101

10. Appendix I – Questionnaire ................................................................................................. 105

1.2

List of Tables

Table 1: Energy Efficiency Measures Implemented in Industry 1975 – 2017 ............................ 21 Table 2: Report Structure .............................................................................................................. 23 Table 3: Team Members ............................................................................................................... 24 Table 4: Main Energy Efficiency Trends, Policies, and Measures within EU Industry .............. 27 Table 5: Overview of European Legislation addressing Energy Efficiency in the Building Sector ....................................................................................................................................................... 31 Table 6: Designated Company Number ........................................................................................ 59 Table 7: New and Upgraded Interventions per Intervention Type ............................................... 62 Table 8: Cost of Carrying out Energy Audit ................................................................................. 63 Table 9 : Energy Efficiency Measures Implemented by Non-SMEs ............................................ 67 Table 10: Number of Interventions per Type per Company ......................................................... 70 Table 11: Cost of Intervention per Company (First 10 companies) ............................................. 71 Table 12 - Cost of Intervention per Company (Next 10 Companies) ........................................... 72 Table 13: The Average Cost and Savings per Individual Intervention ......................................... 75 Table 14: Investment Cost by Status ............................................................................................ 75 Table 15: Intervention Areas With Payback Periods Ordered In Ascending Order ..................... 76 Table 16: Savings per Company (First 10 Companies) ................................................................ 79 Table 17: Savings per Company (Next 10 Companies)................................................................ 80 Table 18 : Sum of kWh Savings per Intervention Type ............................................................... 82 Table 19 : Sum of kWh Savings per participating Non-SME ...................................................... 83 Table 20 : The Sum of 2015 and 2016 kWh Consumption .......................................................... 84 Table 21: The Amount of Energy Saved as a percentage of Consumption per Company ........... 85 Table 22: The Use of Renewable Energy Sources at Company Premises .................................... 86 Table 23: Data related to each Company's Premises .................................................................... 89 Table 24: Planned Solar Energy Installations ............................................................................... 96

1.3

List of Figures

Figure 1 - Energy efficiency measures in place in the EU 28 ..................................................... 20 Figure 2 - Energy Dependence Levels ......................................................................................... 45 Figure 3 – Macroeconomic Energy Intensity ............................................................................... 46 Figure 4 – Malta’s Energy Consumption, GDP and Energy Efficiency Index (100=2000) ........ 47 Figure 5 - Main Energy Efficiency indicators in Maltese Industry (100=2000) ......................... 48

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Figure 6 - Overview of Challenges, Recommendations, Good-Practices, and Examples related to the Implementation of Article 8 of the EED ................................................................................ 51 Figure 7 – Energy Efficiency Actions .......................................................................................... 61 Figure 8 - New and Upgrade Interventions per Intervention Type ............................................... 63 Figure 9 - The Cost per Type of Intervention ............................................................................... 67 Figure 10 - Saving made per Type of Intervention ....................................................................... 68 Figure 11 - A Comparison between the Cost and Savings per Intervention Type ....................... 68 Figure 12 - Cost and Savings per Individual Intervention ............................................................ 77 Figure 13 - Cost and Savings per Individual Intervention (Excluding PVs) ................................ 77 Figure 14 - Payback Period per Individual Intervention (Years) .................................................. 78 Figure 15 - Preferred Payback Period in Years ............................................................................ 81 Figure 16 - Comparison between 2015 and 2016 Consumption (kWh) ....................................... 85 Figure 17 - Share of Non-SMEs using RES ................................................................................. 88 Figure 18 – Energy Performance Certificates ............................................................................... 90 Figure 19 - Next Renovation in Years .......................................................................................... 91 Figure 20 - The Peak Power per Building .................................................................................... 92 Figure 21 - The Peak Power per Building (Outlier Removed) ..................................................... 92 Figure 22 - Total Roof Area in Squared Meters ........................................................................... 94 Figure 23 - Roof Area Occupied by Solar Installations in Squared Meters ................................. 94 Figure 24 - Total Roof Area in Squared Meters and Percentage Occupied by Solar Installations95 Figure 25 - Roof Area Available for Solar Installations ............................................................... 95

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Investing in Energy Project - An Environmental-Economic Report on the Implementation of Energy Efficiency Measures by Industry

Introductory Letter & Disclaimer

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Equinox Advisory Ltd. 36, Archbishop Street, Valletta VLT 1447, Malta 17/07/2017

The Malta Business Bureau, Head Office, Cornerline, Level 1, Triq Dun Karm, B'Kara, BKR9039 Dear Sirs,

2017 Non-SME Economic Analysis Report

We are pleased to be submitting this report in line with the terms of reference of our Agreement for the provision of analytical services.

This report was commissioned by the Malta Business Bureau (MBB) and its project partners, the Malta Chamber of Commerce, and the Energy and Water Agency, as part of the ‘Investing in Energy Project’, co-financed by the Regulator for Energy and Water Services (REWS) and the Ministry for the Economy Investment and Business (MEIB).

Our conclusions are the result of our professional judgment, proprietary calculation methodologies and algorithms, as well as information passed on to us by the MBB, which was in turn collected from the Non-Small- to Medium- sized Enterprise (referred to hereinafter as Non-SME) sector.

No independent audit of the information that has been passed on to us has been carried out by Equinox Advisory as this was not within our scope of works. The data provided has

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therefore been taken to be correct, as neither Equinox nor the MBB had any way of validating it following collection.

The data this study refers to has been collected by the MBB through a questionnaire it distributed to a number of Malta-based Non-SMEs following discussions with Equinox Advisory. On the basis of this data, Equinox Advisory has compiled a report which provides a snapshot of the current state of industry’s endeavour to implement energy efficiency measures and about likely future interventions.

In accordance with our terms of reference for this study, we have prepared this report covering an economic analysis of energy efficiency measures implemented by industry in Malta. This report will examine the impact of measures that have already been taken by Non-SMEs, and sheds light on Non-SMEs’ planned activities in this area.

This Report is provided as-is and Equinox accepts no responsibility and disclaims any liability for the use or misuse of this report.

Should you have any queries or wish to discuss any matters further, please contact the undersigned, by email on Bernard.Mallia@EquinoxAdvisory.com.

Yours sincerely,

Bernard Mallia On behalf of Equinox Advisory Ltd.

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Investing in Energy Project - An Environmental-Economic Report on the Implementation of Energy Efficiency Measures by Industry

List of Acronyms Used throughout the Study

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Description

Acronym

CHP

Combined Heat and Power

EED

Energy Efficiency Directive

EPBD

Energy Performance of Buildings Directive

ETS

Emissions Trading Scheme

EU

European Union

GDP

Gross Domestic Product

GHG

Green House Gas

GWh

Gigawatt Hours The Confederation of National Associations of Hotels, Restaurants,

HOTREC

CafĂŠs and Similar Establishments in the European Union and European Economic Area

kWp

Kilowatt Peak

MBB

Malta Business Bureau

MEIB

Ministry for the Economy Investment and Business

MS

Member States

Mtoe

Million Tonnes of Oil Equivalent

NEEAP

National Energy Efficiency Action Plan

nZEBs

Nearly Zero-Energy Buildings

PV

Photovoltaic

RED II

Renewable Energy Directive

REWS

Regulator for Energy and Water Services

ROI

Return on Investment

SME

Small to Medium Enterprise

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Investing in Energy Project - An Environmental-Economic Report on the Implementation of Energy Efficiency Measures by Industry

Executive Summary

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The MBB, The Energy and Water Agency, The Malta Chamber, REWS and MEIB have agreed that there is a need to start putting together a picture of the energy efficiency situation in the Non-SME business sector in Malta. They have recognised the fact that the unavailability of data in this sector is hampering efforts, both at policy-making level and also at business level, to channel investment into what constitutes low-hanging fruit in energy efficiency and also in the development of macroeconomic policies that reflect the aspirations and the needs of Malta in energy efficiency, and they have therefore commissioned Equinox Advisory to provide them with technical assistance in the areas where such assistance can make a real difference. This project, which delves into both quantitative and qualitative aspects of energy efficiency in the Maltese Non-SME sector, has been commissioned under the aegis of the Investing in Energy project, a two-year project that seeks to improve energy efficiency within the Maltese business sector.

As a first step in Equinox Advisory's undertaking, a scoping meeting was arranged and this was followed up by work on the data collection questionnaire, consolidation of data, data analysis and report-writing in the same respective order in which they appear here.

While this report constitutes what Equinox Advisory believes to be a good first step in gaining insight into energy efficiency practices in Malta for which data is at best very scant and fragmented, for some people (including the analysts working on this report) it will understandably elicit more questions than it provides answers. This is, from both a practical and a social sciences standpoint, not only acceptable but also something to be expected as the MBB sought to make a fine balancing act between trying to maximise Non-SME response (and therefore having to keep the data collection questionnaires as brief as possible) and trying to get as full a picture of the Non-SME sector as possible (and therefore having to increase the number of data points). The result is a questionnaire that despite lacking comprehensiveness and a full response rate, still provides an intricately-woven tapestry of information which, notwithstanding its underlying issues, makes for an interesting insight. It is worth noting that this is being provided for Malta for the first time and perhaps more importantly allows for the right questions to be asked in

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the hope of being answered comprehensively in the future. Indeed, the findings of this exercise that culminated in the compilation of this report are not only of a sectoral interest but have several policy-making implications that should be of interest to authorities dealing with industrial policy, energy policy, fund allocations and prioritisation, external relations, as well as climate change mitigation and the environment.

4.1

Methodology

This exercise entailed a number of key methodological steps. These are delineated hereunder.

A preliminary idea of the scope of the report was first formed, following which the questionnaire itself was drafted and then optimised prior to being sent for data collection.

The questionnaire that has been made use of by this study is being reproduced in Annex I of this report. It has been distributed by the MBB with a view to collecting the primary data that needed to be used to estimate the results outlined in this report. This questionnaire has been distributed to 55 Non-SMEs and 21 responses have been received by 20 Non-SMEs (one of which represents a group of companies that submitted 2 responses), on the basis of which a dataset has been compiled. This has fallen short of the target response of 30 Non-SMEs, which were required to make the dataset statistically representative, but it was not possible to obtain additional responses since response was requested on a voluntary basis and all efforts that could possibly be made by the MBB to obtain additional data have been exhausted.

The questions asked in the questionnaire primarily sought to gauge the effort of each enterprise in complying with legal obligations emanating from the Energy Efficiency Directive (EED), the Energy Performance in Buildings Directive (EPBD) and the Renewable Energy Directive (RED II) , while providing an understanding as to the costs

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and savings resulting from energy efficiency measures which Non-SMEs have in place at the moment, as well as those they intend to implement in the foreseeable future.

Upon receiving the final dataset, Equinox Advisory analysed the data and took a number of different views to try to present as complete a picture as was made possible with the dataset available. The views on this data set are presented in Section 7 of this report. The analysis was conducted at both an aggregate level and an individual enterprise level in order to provide a thorough understanding of each respondent’s and the sector’s state of play. For confidentiality and data protection reasons, the results presented on the basis of the individual enterprise level analysis have been coded so as not to disclose the identity of the replying entity to which the data presented refers, as this could in some cases represent commercially-sensitive information.

4.2

Main Findings

Out of the 132 measures recommended by energy audits that have been undertaken and which were referred to by responding non-SMEs, 19 could not be quantified in terms of costs and savings due to insufficient data. The most popular measures that have been implemented by Maltese enterprises relate to: •

Lighting;

•

Electrical Efficiency of Equipment or Machinery; and

•

Insulation.

The economic analysis also brought to light the fact that the majority of recorded energy efficiency measures were upgrades rather than investments in new implementations or machinery. Moreover, the majority of non-SME respondents opt to engage external energy auditors rather than to carry out the audits in-house.

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It is worth noting that at the aggregate level, a total of EUR 6,712,811 was spent or was planned for spending on energy efficiency measures in 2015 and 2016, and these have resulted in annual savings and annual savings potential of EUR 1,046,604. At the individual entity level, the highest level of expenditure recorded was EUR 3,061,058 and the expenditure was directed at energy efficiency interventions.

On average, photovoltaic (PV) installations seem to be attracting the bulk of the investment, with each intervention costing an average of EUR 896,835 and giving rise to an average annual savings of EUR 84,618.

From the data collected, it transpires that the interventions that take the least amount of time to recoup in terms of initial investment costs are water-heating interventions. On average, these systems have a payback period of 2.1 years. Lighting and Equipment / Machinery measures are the next best intervention category in terms of payback period, as it takes 2.3 years, on average, to recoup the initial investment thereon.

In terms of Return on Investment (ROI) related to energy efficiency capital projects, the average ideal ROI for energy-related investments has been found to be 1.71 years, whereas the average maximum acceptable ROI is 2.94 years. While this is in line with measures taken in the Lighting and the Electrical Efficiency of Equipment or Machinery areas, it is in stark contrast with the investments observed in PV installations and all other areas except for the Electrical efficiency of Equipment or Machinery, Insulation, Lighting, and Water Heating intervention categories.

The results of the economic analysis also indicate that, on average, 9,835,327 kiloWatt hours (kWh) of energy is being saved every year as a result of the energy efficiency interventions. The highest annual energy savings that have been registered by an individual entity amount to 3,661,671 kWh. Apart from having a pecuniary dimension in terms of cost savings for the businesses involved, this also represents an economic benefit that does not have a market price in terms of carbon and localised pollution savings. Based on old (i.e. pre-interconnector) conversion rates, this would have saved the environment 4,623 tonnes of Greenhouse Gases and Greenhouse Gas equivalents.

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However, given the recent rebalancing in the country’s energy mix with electricity being produced using gas turbines and imported from an electricity interconnector with Sicily, and in the absence of information as to the provenance of the interconnector electricity and of the proportions in which energy is being generated where, it is impossible to establish an accurate figure for this economic benefit, either in the aggregate or in its component parts. Accordingly, the foregoing figure can no longer be considered to be valid.

The report concludes by providing an analysis on the use of renewable energy sources at different company premises. By means of this analysis, Equinox Advisory found that a significant number of non-SMEs have a high percentage of roof space available that can be utilised for PV or other installations requiring access to sunlight. Based on the results of the entire economic analysis, this type of energy efficiency measure is quite popular among businesses, despite its relatively high capital expenditure level and its relatively long payback period. This might be due to Government schemes that finance part of the investment cost or provide an attractive feed-in tariff, but could not be determined by the information collected in the questionnaire distributed as part of this exercise.

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5. Introduction

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Project Title:

5.1

The Investing in Energy Project

In December of 2016, the Malta Business Bureau (MBB), along with the Malta Chamber of Commerce and the Agency of Energy and Water, launched the Investing in Energy Project. This project is being coordinated by the MBB and is co-financed by the REWS and the MEIB. This two-year project consists of two phases, namely: (1) a data-collection phase focusing on collecting inexistent data related to energy consumption by Non-SMEs; and (2) a second phase which will focus on the roll-out of a pilot set of energy audits. In this ambit, this project fits in well with the MBB’s range of services for local businesses, as well as its role as Malta’s advocate for European Union (EU) policy, regulation, and legislation affecting industry.

The Investing in Energy Project will also complement the Non-SME Voluntary Agreement Programme

1

since both initiatives are geared towards promoting the take-up of energy

efficiency measures by industry. The Non-SME Voluntary Agreement Programme targets non-SMEs and the Investing in Energy Project focuses on Medium-Sized enterprises whose main business activity revolves around Manufacturing (NACE Code C) as well as Wholesale and Retail Trade 2 (NACE Code G).

This report will focus on examining energy efficiency measures taken up by Non-SMEs and is intended to establish a baseline that will be used in the future when similar studies are being prepared.

In line with the terms of reference for this project, this report will consider the economic impacts of Maltese Non-SMEs complying with Article 8 of the Energy Efficiency Directive (2012/27/EU) and will also, where possible and relevant see whether there has been any

1

Vide http://mbb.org.mt/media-events/press-releases/mbb-welcomes-industry-commitment-to-energyefficiency/ for more information on this initiative.

2 This includes the Import, Distribution, and Retail economic sectors.

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impact deriving from the RED II and the EPBD. The main aim if this report is to analyse and interpret the data collected by the MBB and to come up with a snapshot of the present situation on the basis of these findings.

5.2

The Investing in Water Project

The Investing in Energy Project builds on MBB’s award-winning project “Investing in Water”. This project was financed by the EU LIFE+ programme and was supported by the Ministry for Tourism, Culture and the Environment and EasyDry Malta. Through the Investing in Water project, the MBB provided expert advice to enterprises on water saving opportunities in their operations with the aim of bringing about a 10% decrease in water consumption among 20% of its target segment 3. A second strand of the project focused on the completion of approximately forty Water Audits by enterprises in various sectors of economic activity. By means of this project, average water consumption savings by 14% of the MBB’s target audience amounted to 28%. This resulted in an astounding 96.2 million litres of water saved per year 4.

On the basis of the Investment in Water project findings, the MBB carried out a study in collaboration with the HOTREC national partners in Malta, Belgium, the Czech Republic, Hungary, Ireland, and Slovenia. This study, published in June 2015, focused on ‘The Potential for Energy and Water Savings within the EU through Flow Rate Regulation and Greywater Treatment’ in Malta’s hotel industry. The study’s findings indicate that, potentially, EUR 1.6 billion per annum can be saved by the hotel industry at the European level. The study also indicates that the hotel industry require a maximum of three to five

3

EU LIFE+ (2014); Final Report; EU LIFE+ Investing in Water Project; Available at: http://www.investinginwater.org/Downloadables/Resource.ashx?PostId=2748&PostAssetId=101146&Pin= 4 Ibid.

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years as their return on investment period, in order to consider energy and water saving measures related to greywater treatment to be feasible 5.

5.3

Energy Efficiency Measures within the European Union

In the wake of the Paris Agreement, which resulted from the 21 st Conference of Parties of the United Nations Framework Convention on Climate Change, good practices in energy efficiency measures have become one of the European Union’s primary tools to support a transition towards a low carbon economy, to promote investment opportunities, and to bolster economic growth and employment. For this reason, the European Commission has raised its energy efficiency target to 30% by 2030 6.

In the past, increased economic growth highly depended on increases in energy use. This meant that a decrease in energy demand led to a decrease in economic activity. In recent decades, as a result of European and national energy efficiency policies, European Union Member States (MS) have managed to decouple energy growth and energy demand.

This implies that it is now possible for an economy to grow while decreasing its ‘energy intensity’ level or at least while keeping it constant. As outlined in Section 6.3 of this report, over the past years, Malta’s energy intensity levels have decreased in a period of economic expansion.

5

Malta Business Bureau (2015); The Potential for Energy and Water Savings within the EU through Flow Rate Regulation and Greywater Treatment; Available at: http://mbb.org.mt/uncategorised/the-potential-forenergy-and-water-savings-within-the-eu-through-flow-rate-regulation-and-greywater-treatment-june-2015/ 6 European Commission (2017); Good Practices in Energy Efficiency for a Sustainable, Safer, and more Competitive Europe; Available at: https://ec.europa.eu/energy/sites/ener/files/publication/version2-web.pdf

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Figure 1 - Energy efficiency measures in place in the EU 28 7

Source: European Commission Figure 1 shows that the number of energy efficiency measures related to SMEs in the EU are only surpassed by energy efficiency and renewable energy measures in buildings.

This is due to the fact that the Directive on Energy Performance of Buildings sets out mandatory efficiency standards for all new buildings and for what it refers to as “deep renovations�.

This section of the report summarises statistics and facts related to energy efficiency measures in industry, businesses and services within the EU to provide the backdrop against which the analysis that we undertake in the rest of this report takes place.

Indeed, according to the Good Practices in Energy Efficiency for a Sustainable, Safer, and more Competitive Europe Study 8, financial measures remain the most popular among other successful policies and measures implemented by industry over the past four decades. These usually take the form of energy audit financing for both large enterprises and SMEs or financial incentives and grants.

7 8

Ibid.

Ibid.

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Other energy efficiency measures related to industry included energy efficiency networks, benchmarking, and voluntary agreements, as well as environmental legislation and regulations that aim to reduce the energy intensity of different economic sectors. By putting a price on CO2 emissions, the EU Emissions Trading Scheme (ETS) has also provided an incentive to use low carbon fuels and to invest in energy efficiency measures.

The ODYSSEE MURE II project, which attempts to shed light on the measures implemented by EU 28 MS, provides a significant indicator as to the popularity of financial measures relative to the other types of measures.

Table 1: Energy Efficiency Measures Implemented in Industry 1975 – 2017 9

Source: MURE II Database Type of Energy Efficiency Measure Co-operative Measures, Financial Co-operative Measures, Financial, Information/Education/Training Co-operative Measures, Fiscal/Tariffs Financial Financial, Fiscal/Tariffs Financial, Information/Education/Training Financial, Legislative/Informative Financial, Legislative/Normative Financial, Unknown Fiscal/Tariffs Fiscal/Tariffs, Information/Education/Training Fiscal/Tariffs, Information/Education/Training, Legislative/Informative Grand Total

Count of Measures 1 1 3 125 3 7 4 5 1 10 1 1 162

Within the EU’s services sector, the biggest consumers of energy are the wholesale and retail trade sectors. The economic activity resulting from this sector amounted to a quarter of the EU's final energy consumption in 2012, 73% of which were used for heating and

9

ODDYSSEE-MURE Project (2017); MURE II Database; Available at: http://www.measures-odysseemure.eu/query-energy-efficiency-policy-industry.asp . Data is not available for all countries, so the results presented are not comprehensive.

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cooling

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Investing in Energy Project - An Environmental-Economic Report on the Implementation of Energy Efficiency Measures by Industry

On the other hand, SMEs account for approximately 99.8% of enterprises in

the EU’s non-financial sector

11

and therefore, their energy demand is considerable. A

major issue that has been identified when energy efficiency measures were targeted towards SMEs is that they usually lack the capacity or resources to prioritise investment in energy efficiency. However, despite relatively low energy savings per enterprise, targeting the SME sector will offer considerable cost-effective market and non-market savings potential on account of the proportion of total industry that they represent.

It has been estimated that the capital intensiveness of deploying energy efficiency measures and renewable energy infrastructure will need to reach EUR 379 billion annually over the 2020-2030 period in order to meet the EU’s 2030 energy and climate targets 12. The European Commission has thence identified the need of combining private investment with public financing in order to leverage private sector spending and to address environmental market failures generated by underspending within the bloc. The Clean Energy for all Europeans package, announced in 2016, includes specific measures and initiatives that will lead the clean energy transition, “[b]y mobilising up to 177 billion Euros of public and private investment per year from 2021[. T]his package can generate up to [a] 1% increase in GDP over the next decade and create 900,000 new jobs.”

10

13

European Commission (2016); An EU Strategy on Heating and Cooling {SWD(2016) 24 final}; Available at: https://ec.europa.eu/energy/sites/ener/files/documents/1_EN_autre_document_travail_service_part1_v6_ 0.pdf 11 European Commission (2017); Good Practices in Energy Efficiency for a Sustainable, Safer, and more Competitive Europe; Available at: https://ec.europa.eu/energy/sites/ener/files/publication/version2-web.pdf 12 Ibid 13 European Commission (2016); Clean Energy for All Europeans – unlocking Europe's growth potential Press Release; Available at: http://europa.eu/rapid/press-release_IP-16-4009_en.htm

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Investing in Energy Project - An Environmental-Economic Report on the Implementation of Energy Efficiency Measures by Industry

Report Structure

This report has been structured as follows in line with Equinox Advisory’s internal Guidelines for conducting Environmental Economics Analyses.

Table 2: Report Structure

Section Number and Title

Description

3. List of Acronyms Used throughout the Study

Provides a list of acronyms used throughout the study for quick reference purposes.

4. Executive Summary

Provides a quick overview of the most salient points of the study

5 Introduction

Provides an introduction to the study.

6 The Context

Describes the macroeconomic, regulatory, and policy context in which the project will be implemented.

7 Economics Analysis

Presents a summary of the results of the economics analysis carried out on the basis of the survey undertaken by the MBB.

8 Conclusion

Concludes the study and presents the main findings.

9 References

Provides the references used in compiling this study.

Please note that hereinafter the term ‘Project’ refers to the first part of the ‘Investing in Energy’ project as described in Section 7 of this report.

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Investing in Energy Project - An Environmental-Economic Report on the Implementation of Energy Efficiency Measures by Industry

Data on the Study Owner

The Owner of the Study is the Malta Business Bureau, which has the following contact details: Name of Client Address City Country Tel E-mail

5.6

:

Malta Business Bureau

:

Malta Business Bureau, Head Office, Cornerline, Level 1, Triq Dun Karm.

: : : :

Birkirkara BKR9039 Malta (+356) 2125 1719 gsaliba@mbb.org.mt

Authors of the Study

This report has been compiled by Equinox Advisory Ltd. and has made use of data provided by the MBB, with the exception of Section 6.2.2 which was compiled by the MBB itself. The following individuals have been involved in delivering this comprehensive study as per Equinox Advisory’s quality standards.

Table 3: Team Members Company

Name

Expertise

Bernard Mallia

Environment and Resource Economics Expert

Shaun Micallef

Economics Expertise

Reece Delia

Costing Expertise

Diana Spiteri

EU Affairs Expertise

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6. The General Context

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6.1

Investing in Energy Project - An Environmental-Economic Report on the Implementation of Energy Efficiency Measures by Industry

The EU Backdrop

The Energy Union is one of the ten priorities of the European Commission. The Energy Union initiative is intended to improve energy security, while making it affordable and sustainable. Among its objectives, the Commission intends to reduce the EU’s energy use by 27% or more by 2030, as well as to build on the EU’s target of emitting at least 40% less greenhouse gases by 2030 14. The European Commission reinforced its efforts to create an Energy Union by combining it with other flagship initiatives such as the Investment Plan for Europe, the Digital Single Market, and the Capital Markets Union.

The EU’s Energy Union strategy is made up of five interrelated policy areas, namely: 1. Security Solidarity and Trust; 2. A fully-Integrated Internal Energy Market; 3. Energy Efficiency; 4. Climate Action – Decarbonising the Economy; and 5. Research, Innovation and Competitiveness.

Under the Energy Efficiency Policy Heading, energy efficiency measures that are intended to prod European citizens and enterprises to capitalise on potential savings at all stages of the energy chain, need to be implemented. At EU level, a number of policies aimed at improving energy efficiency have been adopted. These include “an annual reduction of 1.5% in national energy sales; mandatory energy efficiency certificates accompanying the sale and rental of buildings; and the preparation of National Energy Efficiency Action Plans every three years by EU countries”

14

15.

European Commission (2017); Energy Union and Climate Priorities; Available https://ec.europa.eu/commission/priorities/energy-union-and-climate_en#background 15 European Commission (2017); Energy Efficiency; Available https://ec.europa.eu/energy/en/topics/energy-efficiency

at: at:

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Both the European Commission and the Maltese Government have identified energy efficiency measures within industry, especially the manufacturing industry, as high potential drivers of change. The cost of energy is a major component of industry’s total cost of operation. Promoting energy efficiency measures within industry serves a dual role. Firstly, these measures help European Member States (MSs) to reach the EU’s 2030 targets. Secondly, such measures reduce operating costs thereby allowing enterprises to increase their competitiveness in an increasingly cut-throat international business environment.

A study on energy efficiency trends and policies in industry, carried out under the auspices of the ODYSSEE-MURE project referred to in the previous section of this study, identified the following major trends and policies: Table 4: Main Energy Efficiency Trends, Policies, and Measures within EU Industry

Trends

16

Policies and Measures

Industrial energy consumption has remained Financial measures are, by far, the dominant approximately stable at EU level between 2000 measure type in industry in almost all EU Member and 2007 and has decreased rapidly since then, States. Around 50% of the policies addressing with a contraction twice faster than industrial energy efficiency in industry may be said to be activity.

Since 2007, more than half of the reduction in consumption was linked to the decrease in industrial activity and only one fourth was linked to energy savings.

financial measures.

The Energy Efficiency Directive (EED) triggered new energy efficiency policies in EU Member States. Within the industrial context, these include measures introduced under Article 7 (energy efficiency obligations and/or alternative

16

ODYSSEE-MURE (2015); Energy Efficiency Trends and Policies in Industry; Available at: http://www.odyssee-mure.eu/publications/br/energy-efficiency-trends-policies-industry.pdf

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measures), mandatory audits (Article 8) and new certification/qualification

schemes.

National

Energy Efficiency Action Plan (NEEAP) measures constitute about 50% of the measures in the industrial sector in the MURE II database 17.

Since 2007, energy savings were 2 and a half times lower than over the 2000-2007 period, There is no clear correlation between the impact meaning that there has been a much slower level of energy efficiency measures and the energy efficiency progress since the recession measure categories. Both high-impact and low(0.9% per year since 2007 compared to 1.9% per impact measures stem from a variety of measure year before). This is due to the fact that progress typologies. Only informative measures are slowed in most branches and no improvement directly of a relatively low impact and are mainly was recorded in others (e.g. steel, cement, seen as accompanying measures. The indirect machinery). On average, energy efficiency has impact is however not measured. improved by 1.4% per year in the EU since 2000.

Energy audits and energy management are The chemical industry is the main energy considered to be important instruments to consuming branch with 19% of total industrial recognise and observe existing economic energy consumption in 2013, followed by steel with 18%; efficiency

potential,

through

systematic

while the share of chemicals is progressing (+1.5 procedures to gain knowledge and develop a percentage points at EU level since 2000), the strategy to achieve energy efficiency targets. Thus share of steel is declining (- 2 percentage points far, they play a crucial role in the policy mix for the over the same period).

industrial sector. One central element to dispense these

17

instruments

in

Europe

is

the

This must be interpreted with caution as the Database is far from being complete given that the ODYSSEE-MURE project has faced issues similar to the present one when it comes to data collection.

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implementation of Article 8 of the EED, which has been delayed in several EU Member States. Until June 2015, some Member States did not even deliver a national response to Article 8 as requested by the European Commission.

The next sections of this report aim to describe the Investing in Energy Project’s regulatory, macroeconomic, and policy context. Given that it is both the Maltese Government’s and the European Commission’s intention to increase energy efficiency in industry with a view to reaching ambitious, self-imposed targets, together with statutory ones, a clear understanding of the setting in which the project is operating would be in order.

6.2 6.2.1

Regulatory Context EU Regulatory Context

The EU regulatory context that characterises the Investing in Energy project stems is closely linked to the European Commission’s recently-announced “Clean Energy for All Europeans” package. This energy package was announced in December of 2016 and its main intention is to keep the EU competitive while aiding in the bloc’s clean energy transition in a changing global energy market.

The Clean Energy for All Europeans package includes a set of legislative proposals that cover energy efficiency, renewable energy, electricity supply security, the design of the electricity market, and governance rules for the Energy Union. In addition, the Commission proposed a new way forward for eco-design as well as a strategy for

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connected and automated mobility. In this ambit, the Clean Energy for All Europeans package is made up of the following European Union Directives: 1. Directive 2010/31/EU of the European Parliament and of the Council of 19 May 2010 on the energy performance of buildings 18.

2. Directive 2009/28/EC of the European Parliament and of the Council of 23 April 2009 on the promotion of the use of energy from renewable sources and amending and subsequently repealing Directives 2001/77/EC and 2003/30/EC

19.

3. Directive 2012/27/EU of the European Parliament and of the Council of 25 October 2012 on energy efficiency, amending Directives 2009/125/EC and 2010/30/EU and repealing Directives 2004/8/EC and 2006/32/EC 20.

4. Directive 2009/125/EC of the European Parliament and of the Council of 21 October 2009 establishing a framework for the setting of eco-design requirements for energy-related products 21.

5. Directive 2010/30/EU of the European Parliament and of the Council of 19 May 2010 on the indication by labelling and standard product information of the consumption of energy and other resources by energy-related products 22.

For the purposes of this study, the MBB deemed the Eco-design and the Energy Labelling directives as out-of-scope due to: 1. The fact that these directives focus on producers of goods rather than consumers; and

18

Available at: http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A32010L0031 Available at: http://eur-lex.europa.eu/legal-content/EN/ALL/?uri=celex%3A32009L0028 20 Available at: http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=celex%3A32012L0027 21 Available at: http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:32009L0125 22 Available at: http://eur-lex.europa.eu/legal-content/EN/ALL/?uri=CELEX%3A32010L0030 19

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2. The problems that including these Directives would have created in terms of the nature and the quantity of the data that had to be collected and the prospective response rate.

For this reason, these two directives have been excluded from the scope of the present study and only feature in Table 5, below, for the sake of completeness and to provide a full overview of the five EU directives relevant to the European Commission’s Clean Energy for all Europeans Package. In striving to provide a complete overview, the table below focuses on the elements of each directive that is relevant to the Investing in Energy project, as well as energy efficiency as a whole. Summaries of the Energy Performance of Buildings Directive, the Renewable Energy Directive, and the Energy Efficiency Directive follow the Overview Table.

Table 5: Overview of European Legislation addressing Energy Efficiency in the Building Sector

Energy Performance of Buildings Directive (EPBD) Requires Member States to develop and apply a methodological framework for calculating the energy performance of buildings.

This calculation method shall consider thermal building characteristics as well as the technological equipment for the thermal supply.

Renewable Energy Directive (RED II)

Obliges Member States to set up sector-specific targets for renewable heating and cooling.

Energy Efficiency Directive (EED)

Eco-design Directive

Energy labelling Directive

Obliges Member States to establish a long-term strategy for mobilising investment in the renovation of the national stock of residential and commercial buildings, both public and private.

Sets minimum efficiency standards for technologies used in the building sector (eg, boilers, hot water generators, pumps, ventilation, etc).

Obliges Member States to establish efficiencylabelling schemes for a number of technologies used in the building sector.

Obliges Member States to take the necessary measures to ensure that minimum energy performance requirements for buildings or building units are set, applied and met with a view to achieving cost-optimal levels; this regulation applies to all new buildings and existing buildings that undergo major renovation.

Requires Member States to adopt support policies for RES-H (project to help Member States to examine heating and cooling in light of renewable energy sources) at least for new buildings and existing buildings that are subject to a major renovation.

Requires Member States to ensure a refurbishment rate of 3% per year related to the total floor area of all heated and/or cooled buildings (> 500 m2) owned and occupied by their central governments (applying the standards set by the EPBD recast).

It contributes to sustainable development by increasing energy efficiency and the level of protection of the environment, while at the same time increasing the security of the energy supply.

The display of other labels, marks, symbols or inscriptions which do not comply with the requirements of this Directive and of the relevant delegated acts is prohibited, if such display is likely to mislead or confuse end-users with respect to the consumption of energy or, where relevant, other essential resources during use.

Requires Member States to take measures that aim at

Defines technology- specific restrictions (in view of

Requires Member States to establish energy efficiency

Nine implementing measures have already

Information relating to the consumption of electric

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optimising the performance, installation, appropriate dimensioning, adjustment and control of the technical building systems which are installed in existing buildings.

Obliges Member States to ensure that all new buildings are nearly zeroenergy buildings (nZEBs) by the end of 2020 and that all new public buildings reach this standard two years earlier.

In addition, Member States shall draw up national plans reporting on their plans for increasing the number of nZEBs, the definition of nZEB, the policies/measures to stimulate the transformation of buildings that are refurbished into nZEBs, the interim steps towards nZEB and the implementation of Article 13(4).

Requires Member States to ensure that all accessible parts of the heating and airconditioning systems are regularly inspected and that heating installations older than 15 years are assessed with respect to their energy performance.

Obliges Member States to implement the Energy Performance Certificate schemes according to a number of minimum requirements (especially regarding content, display and disclosure, reliability,

target accounting) for heat pumps and bio- liquids.

Requires Member States to ensure that new public buildings, and existing public buildings that are subject to major renovation, at national, regional and local levels fulfil an exemplary role in the context of the use of RES-H.

obligation schemes (commonly known as White Certificate Schemes) or alternative measures with equivalent effect, aiming at providing efficiency measures that achieve energy savings of 1.5% per year on average.

Obliges Member States to promote the availability of independent high- quality energy audits to all final customers.

The EED obliges Member States to ensure that central governments purchase only products, services and buildings with high energy-efficiency performance, insofar as that is consistent with costeffectiveness, economical feasibility, wider sustainability, technical suitability, as well as sufficient competition.

The EED obliges Member States to ensure that central governments purchase only products, services and buildings with high energy-efficiency performance, insofar as that is consistent with costeffectiveness, economical feasibility, wider sustainability, technical suitability, as well as sufficient competition.

On the basis of transparent and non-discriminatory criteria, Member States shall develop programmes and support schemes for SMEs, to cover costs of an energy audit and of the implementation of highly cost-effective

been adopted – for a total energy saving of 341 TWh, or 12% of the electricity consumption of the EU.

energy, other forms of energy and where relevant other essential resources during use, and supplementary information is, in accordance with delegated acts under this Directive, brought to the attention of end-users by means of a fiche and a label related to products offered for sale, hire, hire-purchase or displayed to end-users directly or indirectly by any means of distance selling, including the Internet.

Where Member States provide any incentives for a product covered by a delegated act, they shall aim at the highest performance levels including the highest class of energy efficiency laid down in the applicable delegated act. Taxation and fiscal measures do not constitute incentives for the purpose of this Directive.

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validity, quality) defined by the Directive.

Investing in Energy Project - An Environmental-Economic Report on the Implementation of Energy Efficiency Measures by Industry

recommendations from the energy audits, if the proposed measures are implemented.

Member States shall carry out a cost-benefit analysis capable of facilitating the identification of the most resource-and cost-efficient solutions to meeting heating and cooling needs.

The cost-benefit analysis shall be covering their territory based on climate conditions, economic feasibility and technical suitability.

6.2.1.1 Energy Performance of Buildings Directive (2010/31/EU) The EPBD targets the high levels of energy consumed by buildings (40% of the EU’s total energy consumption). The Directive aims to limit the ever increasing demand created by buildings in order to reduce the EU’s energy dependence as well as Green House Gas (GHG) emissions. In this context, the Directive covered energy used for heating, cooling, ventilation, lighting, and heating water in buildings.

Along with an Evaluation report and an Impact Assessment, the Clean Energy for all Europeans package includes a Proposal for a Directive amending Directive 2010/31/EU on the energy performance of buildings

23.

Although there is evidence of approximately

48 Million Tonnes of Oil Equivalent (Mtoe) energy being saved in 2014, when compared to the 2007 baseline of the EPDB, the proposal finds that around 75% of buildings in the EU are energy inefficient. For this reason, the European Commission intends to amend

23

Proposal for a DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL amending Directive 2010/31/EU on the energy performance of buildings; Available at: http://eur-lex.europa.eu/legalcontent/EN/TXT/HTML/?uri=CELEX:52016PC0765&from=EN

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the EPBD in order to “accelerate the cost-effective renovation of existing buildings, which represents a 'win-win' option for the EU economy as a whole.” 24

6.2.1.2 Renewable Energy Directive (2009/28/EC) The Renewable Energy Directive (RED II) was published with the intention of creating a common set of rules for the use of renewable energy in the EU. The objectives set out by the Directive are: 1. Reducing GHG emissions; 2. Promoting cleaner transport; 3. Making renewable energy sources account for 20% of EU energy by 2020; 4. Making renewable energy sources account for 10% of energy in the transport sector; and 5. Improve energy efficiency by 20%.

Other than the points tabulated in Table 5, a major requirement of the RED II is an obligation by each Member State to prepare a national renewable energy action plan for 2020. These action plans are intended to set out each Member State’s national targets for the share of energy from renewable sources in different economic sectors in 2020.

The action plans had to be submitted to the European Commission by 30 June 2010.

Malta’s updated National Renewable Energy Action Plan 2015 – 2020 was publised in 2016 by the Office of the Prime Minister 25.

24

Ibid.

Office of the Prime Minister (2016); The National Renewable Energy Action Plan 2015-2020; Available at: https://socialdialogue.gov.mt/en/Public_Consultations/OPM/Documents/The%20National%20Renewable %20Energy%20Action%20Plan.pdf 25

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In 2016, the European Commission adopted a Proposal to revise the Renewable Energy Directive (RED I). This Proposal extended the targets set out by the RED I of 2009 to 2030. Specifically, the Commission targets a 27% share of renewable energy in the EU by 2030

26.

The revised Directive includes general principles that the Member States

should follow when designing support schemes, mainstreams renewables in the heating and cooling sector, and empowers consumers by improving the quality of information provided to them.

6.2.1.3 Energy Efficiency Directive (2012/27/EU) The EED is the piece of EU legislation that is most relevant to the Invest in Energy Project.

The EED’s main objective was to contribute to the 20% energy efficiency target by 2020, which was recently updated to 30% by 2030. The Directive states that should the 20% goal be reached by 2020, a reduction of 1,474 Mtoe of primary energy consumption (base year 2007) should be registered.

Although the salient obligations of the EED have been outlined in Table 5, the most pertinent requirements of the Directive are the obligation by Member States to set up an energy efficiency obligation scheme and the obligation imposed on non-SMEs to prepare periodic energy audits (Article 8).

The energy efficiency obligation scheme requires companies to achieve a yearly energy saving of 1.5% of annual sales to final consumers

27.

In order to reach this target,

companies must promote energy efficiency measures targeted to consumers. These may

26

European Commission (2016); 2016/0382; Proposal for a DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL on the promotion of the use of energy from renewable sources (recast); Available at: http://eur-lex.europa.eu/legalcontent/EN/TXT/HTML/?uri=CELEX:52016PC0767R(01)&from=EN 27 European Commission (2017); Obligation Schemes and Alternative Measures; Available at: https://ec.europa.eu/energy/en/topics/energy-efficiency-directive/obligation-schemes-and-alternativemeasures

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include installing double glazed windows, improving insulation, and improving heating systems.

Article 8 of the EED requires Member States to promote the availability of high quality, cost-effective energy audits. According to the EED, energy audit means a “systematic procedure with the purpose of obtaining adequate knowledge of the existing energy consumption profile of a building or group of buildings, an industrial or commercial operation or installation or a private or public service, identifying and quantifying costeffective energy savings opportunities, and reporting the findings� 28.

Article 8.4 directs that non-SMEs should be subject to energy audits carried out by qualified and/or accredited experts at least every four years. Member States are also obliged to develop programmes to encourage SMEs to undergo energy audits and to subsequently implement the recommendations made under Article 8.2.

The EED further directs that energy audits should take into account relevant European or International Standards. These include EN ISO 50001 (Energy Management Systems), EN 16247-1 (Energy Audits), or, if including an energy audit, EN ISO 14000 (Environmental Management Systems), and thus to be also in line with the provisions of Annex VI which outlines the minimum criteria for energy audits.

To-date, over 90% of Malta's Non-SMEs have complied with the requirement to carry out an energy audit. However, it has not yet been established that the audits reach the minimum criteria. Over 30% of Non-SMEs have further committed to implementing energy efficiency measures on an annual basis. This commitment was brought about through a voluntary agreement drafted by the MBB, and signed by the companies with the Energy and Water Agency.

28

DIRECTIVE 2012/27/EU OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 25 October 2012 on energy efficiency, amending Directives 2009/125/EC and 2010/30/EU and repealing Directives 2004/8/EC and 2006/32/EC

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6.2.2

Investing in Energy Project - An Environmental-Economic Report on the Implementation of Energy Efficiency Measures by Industry

The Local Regulatory Context (Section Authored by the MBB)

6.2.2.1 Malta 2020 Targets Malta’s targets for 2020 comprise the following: 1. Renewable Energy – 10.4% by 2020 29; and 2. Energy Efficiency – Primary Energy Consumption of 822,903 toe by 2020 30.

6.2.2.2 National Action Plans The National Energy Efficiency Action Plan (NEEAP 31), and the National Renewable Energy Action Plan (NREAP 32) provide clear guidance on the policy directions for the respective areas. Both have been updated in 2017 to reflect latest policy developments and direction, particularly in light of the appraoching 2020 target deadlines, and also taking into consideration action and achievements up to December 2015.

6.2.2.3 Overview of how targets will be achieved

Renewable Energy Industrial rooftop capacity is expected to increase by 20 - 27% of current total capacity, equivalent to 15 - 20 MWp. In addition, quarries, car parks, landfills and water reservoirs are expected to be utilised for solar farms, generating an additional 52 - 80% of current total capacity, which translates to 38.4 - 58.4 MWp 33.

29

Table 1, NREAP 2017.

Table 7, NEEAP 2017.

31 https://ec.europa.eu/energy/sites/ener/files/documents/mt_neeap_2017.pdf 32 https://ec.europa.eu/energy/sites/ener/files/documents/dir_2009_0028_action_plan_malta.zip 33 Table 3, NREAP 2017.

30

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These measures form the greater part of the expected increase in renewable energy. Achieving them will require industry mobilisation, both to unlock industry-managed space (rooftops, quarries, car parks), and just as importantly to mobilise investment funds. Given that the capacity increase planned under the NREAP will double current capacity (as per figures reported for December 2015), a large industry-focused drive will be required to achieve the goal.

After solar photovoltaic energy, the next largest contributors to Malta’s 2020 renewable energy target are biofuels in transport (124.29 GWh, which make up 2.10% of Malta’s 10% target) and increased use of heat pumps (89.93 GWh which make up another 1.58% of Malta’s 10% target) 34

.

The main biofuel increase is expected to derive from blending of diesel with biofuels, made mandatory through legal measures with an obligation on pre-mixing at wholesale stage.

The main heat pump increase, on the other hand, is expected to derive from the promotion of air conditioning units for space heating to complement their strong current use for space cooling, particularly for large communal spaces (hotels, factories, offices). The possibility of coupling the latter with seawater or groundwater as a heatsink is also being considered, although there are physical environmental challenges in both cases (for marine application being the flora and fauna effect of heated water discharge and for groundwater being the geophysical effect on heated groundwater discharged into aquifers, which in Malta are fragile).

Industry is one of the main targets for heat pump usage, as defined in the NREAP. As such, efforts need to be made to promote an uptake of heat pump usage as guided by the NREAP.

Energy Efficiency Industry again has a strong role to play in achieving Malta’s national energy efficiency targets.

Through the Energy Efficiency Partner Initiative, where business signatories commit to

34

Table 3, NREAP 2017.

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implementing regular energy efficiency measures, the achievement of a cumulative total of 149 GWh out of the 774 GWh target is forecast. Financial schemes promoting energy efficiency for industry are forecast to achieve an additional cumulative savings of 100 GWh. These two measures represent 29% of the 2020 target. An additional 401 GWh is forecast from renewable energy generated on site for own use, particularly in households, leading to 401 GWh in savings, and representing 42% of the 2020 target

35

. These three measures alone contribute towards the

attainment of 71% of the 2020 target. Additional measures include energy efficiency in buildings, energy efficiency in transport, co-generation, and energy obligation schemes.

6.2.2.4 Legal Notices The Energy Efficiency Directive is transposed into Maltese law through Legal Notice 196 of 2014 36.

The key relevance to Malta’s businesses lies in the obligation on Non-SMEs to perform

mandatory energy audits, the details of which are described in both the Directive and the Legal Notice, at least once every four years. The Legal Notice is supported through a guidance note 37.

The note details the energy audit requirements and susbequent reporting to the national authority, the Energy and Water Agency.

The Renewables Energy Directive is transposed through various legislative sections including: Feed in-tariffs: Legal Notice 422 of 2010, Legal Notice 71 of 2013, Legal Notice 253 of 2013, Legal Notice 271 of 2013, Legal Notice 7 of 2014, Legal Notice 155 of 2014, Legal Notice 416 of 2014 and Legal Notice171 of 2015, Legal Notice 264 of 2015, Legal Notice 365 of 2015, Legal Notice 415 of 2015.

The Energy Performance in Buildings Directive is transposed through Legal Notice376 of 2012, as amended by Legal Notice 48 of 2014.

35

Section 3.1.1.2, NEEAP 2017. http://www.justiceservices.gov.mt/DownloadDocument.aspx?app=lp&itemid=26107&l=1 37 http://mra.org.mt/wp-content/uploads/2012/08/884/Non-SMEs-Guid-Note-final-3-1.pdf 36

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Regulation through certification

Supporting the legislation is a certification drive aimed at energy efficiency auditors, solar photovoltaic and solar thermal system installers. The courses are approved and recognised by the national regulator – REWS – and a list of certified energy auditors and solar system installers is available from the REWS website 38.

6.2.2.5 Comparison of report findings to Malta’s National Action Plans The immediate relevance of this report’s findings to both Action Plans is that it provides an indicative figure for investment needed by industry to reach the two relevant national 2020 targets.

Respondents indicated an investment potential of EUR 4,484,173 to generate 2.067 GWh of solar photovoltaic energy 39. Under the National Energy Efficiency Action Plan 40, a further 25.57 GWh is planned to be generated by industrial rooftops. If the costs reported in this report are taken to be indicative for of industry’s costs for photovoltaic installations, this implies that industry needs to invest a further 55.4 million Euros in photovoltaic installations on industrial rooftops by 2019, to reach the national 2020 target set for industrial roofspace. However, if we rely on costrelated rules of thumb as at November 2017, the pure photovoltaic investment cost excluding any applicable ancillary costs, would amount to 21.7 million Euros.

38

https://www.rews.org.mt/#/en/a/81-providers-res-and-energy-audits This is rather high when juxtaposed to PV-related rules of thumb pertaining to cost as at November 2017.

However, it is not clear whether respondents are taking into account purely PV costs or whether they are also accounting for capitalised cleaning costs, inverter replacement costs, lightning protection costs, substation costs (where applicable), insurance costs, security costs and the like. This figure also depends, in part, on incurred (past) costs and does not account for efficiencies gained over time since past investments have been undertaken.

40 Calculated as follows: end MWp photovoltaic capacity planned is 201.3, of which 20 is industrial roof space. End GWh photovoltaic energy is 278.13. 278.13/201.3=1.38 Gwh per MWp. 20 MWp planned industrial roof space X 1.38 GWh/MWp=27.6 GWh. 39

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It is interesting to note that 47% of respondents already make use of solar photovoltaic energy on their premises, and that a further 15% (5 respondents) are planning on completing installations in the short-term. This is of relevance when considering that Malta’s industrial solar capacity needs to nearly double under the National Renewable Energy Action Plan – if the findings of this report are indicative of industry in general, it would imply that doubling capacity would take Malta’s industry to nearly fully exploited rooftop potential.

Such a scenario highlights the importance of another priority outlined in National Renewable Energy Action Plan – that of seeking alternative sites, such as quarries, car parks, etc, for the placement of additional solar photovoltaic installations to meet the 2020 national renewable energy target– it is worth noting however, that the target for these additional sites is separate to the target for energy generated from industrial roof space, as described in the preceding two paragraphs.

The National Energy Efficiecny Action Plan lists industry efficiency gains of 75 GWh following 2017, towards the 2020 national target. This is to be achieved through the Energy Efficeincy Partner Initiative, which involves the signing of a voluntary agreement between businesses and the national authority, the Energy and Water Agency. The scheme is led by the MBB and the Energy and Water Agency. Through these agreements, businesses committ to implimenting regular energy efficiency measures. The information gathered by this report can be considered indicative of the savings potential for larger enterprises in general. In this case, respondents reported potentail savings of 7.77 GWh for an investment cost of EUR 2,228,638. Taking into consideration that the GWh target is cummulative, a rough indication for the primary GWh that needs to be saved to reach the target, considering the timespan over which it needs to be saved, is 40GWh primary savings. Industry needs to invest an additional EUR 9.2 Million to meet the national 2020 energy efficiency target set for industry through the EEPI scheme.

The above figures can only be considered indicative for the following reasons:

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1) Respondents were Non-SMEs and this report therefore does not consider also SME circumstances. When examing energy use, the Non-SME or SME category is not really relevant, as it is purely financial turnover or number of staff which place businesses into these categories. However, businesses consuming large quanitites of energy could employ fewer staff than certain Non-SMEs. Since this report consists of a mix of heavy energy consumers as well as offices (the lightest energy consumers), it could be considered indiciative for industry in general, however not necessarilyrepresentitive.

2) Economis of scale will also play a considerable factor, particularly for rooftop photovoltaic installations. The figure provided for investment does not examine the economies of scale achieved by respondents, and therefore it should only be taken as an indication.

3) Energy efficiency upgrades depend largely on the level of advancement of the company in question. Several respondents could be considered reasonably advanced in terms of energy performance. MBB experience with industry shows that this is not always the case.

It can therefore be expected that many businesses would have simpler energy efficiency measures to impliment, which would probably incur less costs than those listed in this report. The figures provided however, should be taken as a good general indicator for investment required.

It is also interesting to note that most of the measures provided by companies related to building envelope and general system upgrades, with few measures representing manufacturing equipment upgrades presented. If these measures were included in the range of options considered by businesses to improve their energy performance, the potential energy and financial savings would increase.

From a business case perspective, it is very interesting to note that the data submitted by respondents shows that energy efficiency required a spend of EUR 2,228,638 to gain 7.77 GWh in energy savings, while photovoltaic installations required a spend of EUR EUR 4,484,173 to generate 2.067 GWh of renewable energy. This very clearly demonstrates the vallue for money

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in investing in energy efficiency over renewable energy – general energy efficiency measures reduce consumed energy at an investment cost which is 7.5 times lower than that for energy generated through rooftop photovoltaics.

6.2.2.6 MBB discussion As a business representative NGO, the MBB’s role is to work in the best interest of industry. This report highlights that industry, to enable Malta to meet its 2020 renewable energy and energy efficiency targets, needs to invest around 30.9 to 64.6 million Euros over 2018 and 2019.

It is important to outline that there is no obligation on industry to invest this sum, under neither Maltese nor European law. Despite the lack of obligation, there is the expectation by national and European institutions, that businesses will rise to the challenge and make this investment. Most importantly – investing in energy makes commercial sense if this is done wisely.

As a business representative entity, our conclusions are that the investment works in businesses’ interest. This report clearly outlines attractive returns on investment for the measures presented, exploring 113 energy measures requiring an aggregate investment cost of EUR 6,712,811 which yield aggregate savings of EUR 1,046,604. Savings of over one million euros represent increased profit. While energy savings may not typically be associated with increased profitability – business should ask themselves how much additional turnover would they need to generate to achieve that same added profitability, and how much would need to be invested to generate that additional turnover? In many cases, we are confident that an examination of that question would lead to the conclusion that energy is indeed a worthy investment.

The key question is not therefore, whether energy is worth investing in. They key question is does business have the capacity to make such an investment now, and should business invest in energy or in other commercial areas?

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The answer will depend on the individual business’s circumstances. Energy investment could yield a better ROI than the commercial opportunities available to the individual business. It will also depend on the capital available to the business for investment.

Assuming availability of capital for investment, businesses should then evaluate their commercial options and act based on their priorities. Energy could well be an attractive investment and should feature in the list of priorities for decision.

Identifying energy opportunities is very simple to do using the services of specialist energy auditors, a list of which is publicly available on the REWS website.

6.3

Macroeconomic Context

This section of the report defines the macroeconomic setting related to the MBB’s Investing in Energy project. The section initially covers some indicators that focus on Malta’s energy needs at an aggregate level and then covers energy efficiency indicators at both the aggregate and sectoral level.

As a whole, Malta’s energy dependence level is significantly higher than the average level recorded for the 28 EU Member States as well as the average level recorded for the 19 Euro-Area members. As shown in Figure 2, since 1990, Malta’s energy dependence has fluctuated at around the 100% mark. The Eurozone’s energy dependence level fluctuates at around the 60% mark and in 2015, the EU’s energy dependence level was estimated at 55%. Energy dependency displays the extent to which an economy relies on imports in order to meet its energy needs. The indicator is calculated as net imports divided by the sum of gross inland energy consumption plus bunkers. Malta’s energy dependence level implies that Malta is unsurprisingly highly dependent on energy imports and therefore, there is a need to commit to energy efficiency measures in order to bring about a decrease in Malta’s high levels of dependency.

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Figure 2 - Energy Dependence Levels 41

In comparison to the energy dependence levels depicted above, Malta’s energy intensity levels have followed the European average and have even surpassed the same average in 2015. Figure 3 illustrates the energy intensity of the economy for Malta, the EU and the Euro Area. This indicator is the ratio between the gross inland consumption of energy and the Gross Domestic Product (GDP) for a given year. It measures the energy consumption of an economy and its overall energy efficiency. The gross inland consumption of energy is calculated as the sum of the gross inland consumption of five energy types: coal, electricity, oil, natural gas, and renewable energy sources. Since gross inland consumption is measured in kilogram of oil equivalent (kgoe) and GDP in thousands of euros (EUR 000’s), this ratio is measured in kgoe per 1000 EUR.

41

Eurostat (2017); Energy Dependence %; Available at: http://ec.europa.eu/eurostat/tgm/table.do?tab=table&init=1&plugin=1&language=en&pcode=tsdcc310

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Figure 3 – Macroeconomic Energy Intensity 42

Other than the general trends, policies, and measures presented in Table 4, the ODYSSEE-MURE project team also created country-specific energy efficiency trends by means of country profiles. Malta’s country profile was published in February of 2015 and states that overall, Malta’s Odyssee Energy Efficiency Index (ODEX) for the entire economy has improved by 15% when compared to the year 2000. The ODEX is an index developed by the ODYSSEE-MUSE project in order to measure an economy’s energy efficiency progress at the sectoral and aggregate levels.

42

Eurostat (2017); Energy Intensity of the Economy (kgoe per 1000 EUR); Available at: http://ec.europa.eu/eurostat/tgm/table.do?tab=table&init=1&plugin=1&language=en&pcode=tsdec360

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Figure 4 – Malta’s Energy Consumption, GDP and Energy Efficiency Index (100=2000)

43

When compared to the base year (2000) of the ODYSSEE-MURE project, Malta’s ODEX energy efficiency index for the whole economy had improved by 15% in 2012. An increase of 5% was recorded between 2002 and 2005 and 2012, but this was more than offset by the other years. The chart presented in Figure 4 concludes that overall, in the period 2000 to 2012, Malta has improved the energy efficiency at an average rate of 2.7% per year.

43

ODYSSEE-MURE (2015); Energy Efficiency Country Profile: Malta; Available at: http://www.odysseemure.eu/publications/profiles/malta-efficiency-trends.pdf

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Figure 5 - Main Energy Efficiency indicators in Maltese Industry (100=2000)

44

Figure 5 depicts the ODEX for Malta’s industry sector as a whole, together with individual indices for the chemicals and the food industries. When compared to the base year, the industry sector’s ODEX made very little improvement as of 2012. This was mainly due to a decrease in energy efficiency between 2000 and 2004 followed by an offsetting period of energy efficiency improvements up to 2011, followed again by a deterioration in 2012.

Although the improvement levels over the twelve-year period were very limited, the deterioration trend observed in the initial period of the analysis has at least been reversed.

Other economic sectors which the ODYSSEE-MURE’s ODEX covers include the household and transport sector. Between 2000 and 2012, the energy efficiency level in both the household and the transport sectors have markedly increased. Indeed, the

44

ODYSSEE-MURE (2015); Energy Efficiency Country Profile: Malta; Available at: http://www.odysseemure.eu/publications/profiles/malta-efficiency-trends.pdf

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household sector registered an 11% gain in energy efficiency and the transport sector registered an 18% increase in energy efficiency 45.

The Investing in Energy project’s novel approach in promoting energy efficiency measures to both Non-SMEs and SMEs in Malta takes place within and addresses the macroeconomic situation presented in this section. It endeavours to bring about an overall reduction in both the monetary and the external costs of energy consumption.

6.4

Policy Context

The Investing in Energy Project is in line with the Maltese Government’s policy agenda to improve energy efficiency as part of both the EU’s and Malta’s endeavour to reduce Green House Gas (GHG) and localised pollutant emissions and to thereby improve the country’s levels of air quality and contribute to climate change mitigation. This policy thrust stems from one of the Juncker Commission’s priorities, the Energy Union, as well as a flagship initiative under the Europe 2020 Strategy for a resource-efficient Europe 46.

At the EU level, the European Commission published an Energy Efficiency Plan in 2011.

This promulgated the vision and the strategic direction that energy efficiency in industry would be tackled through stringent requirements for industrial equipment as well as the provision of information for SMEs

47.

By means of this plan, the Commission also

introduced the implementation of energy audits and energy management systems, which were later incorporated in Article 8 of the EED.

45

Ibid.

European Commission (2011); Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions; A ResourceEfficient Europe – Flagship initiative under the Europe 2020 Strategy; Available at: http://eurlex.europa.eu/legal-content/EN/TXT/HTML/?uri=CELEX:52011DC0021&from=en 47 European Commission (2011); Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions; Energy Efficiency Plan 2011; Available at: https://ec.europa.eu/clima/sites/clima/files/strategies/2050/docs/efficiency_plan_en.pdf 46

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A comprehensive study on energy efficiency in European enterprises

48

reviews the

implementation of Article 8 of the EED from a policy-making perspective in extensive detail. The main findings of the literature review and 30 interviews with national experts revealed a number of challenges, recommendations, and good practices related to the implementation of Article 8. An overview of the findings of this study has been summarised in Figure 6 hereunder.

48

European Commission (2016); A Study on Energy Efficiency in Enterprises: Energy Audits and Energy Management Systems; Available at: https://ec.europa.eu/energy/sites/ener/files/documents/EED-Art8Implementation-Study_Task12_Report_FINAL-approved.pdf

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Challenges

Recommendations and [Good-Practices Examples]

Non-SMEs Definition of Large Companies • Implicit definition of large companies; • Lack of data to identify large companies; • Missing details of national implementation; • Implementation deadline for energy audits.

Audits in Management Systems • Timeframe for introducing management systems; • Varying requirements for management systems; • Motives for implementing alternative systems.

Exemptions and Inclusions • Complexity of definition in case of additional criteria.

Multi-Nationals/Multi-Sites • Identification of relevant parts of a group; • Inclusion of mini-sites as part of groups; • Lack of English language guidance documents.

Non-SMEs Legal Framework for Large Companies • Guidance on the definition as non-SME [Easy classification tables/systems (e.g. Austria, Germany, Hungary)]; • Provision of European information sources for identifying companies; • English language guidance documents [Translation of national key documents (e.g. Denmark)]; • Setting up pan-EU28 guidance.

Implementation concerning Large Companies • Prolonged timeframe for fully implementing alternative systems [Report on intended implementation until deadline (e.g. Sweden)]; • Inclusions of foreign companies in the calculation of threshold values; • Harmonized sampling approaches; • Overview of the inclusion of buildings into audits; • Harmonized treatment of international transport.

Buildings and Transport • Consideration of cross-border transportation in energy audits; • Coverage of buildings in energy audits.

Enforcement concerning Large Companies • Ensure appropriate penalties ; • Implement active monitoring approach [Follow-up platforms (e.g. to be established in Austria, Croatia, Italy, Malta, Poland); systematic collection of audit results (e.g. United States)].

Monitoring and Follow-Up • Ongoing definition of the monitoring process; • Administrative reporting and process.

•

Penalties for Non-Compliance • Appropriateness of penalties.

General Issues

•

• •

Provision of easily accessible information to companies [FAQs/interpretation guidelines (e.g. Austria, Germany, Hungary, Italy)]; Stressing non-energy benefits [Information on non-energy benefits (e.g. IEA study)]; Fast conclusion of the national transpositions; Ensuring regular information exchange between MS [Regular meetings across MS (e.g. CA group)].

SMEs SMEs Implementation for SMEs • Relevance of energy demand in SMEs; • Limited organisational capacity of SMEs; • Financial capacity of SMEs; • Organisational decision-making in SMEs.

Energy Audits for SMEs • Encouragement of energy-intensive companies [Additional criterion for including/encouraging energy-intensive companies (e.g. Bulgaria, Czech Republic, Ireland, Italy, Romania)]; • Provision of implementation support [Implementation support for suggested measures (e.g. Germany)]; • Provision of low-interest capital for investments in recommendations ; • Establishment of one-stop shops and involvement of key institutions [Central hub for seeking support and for reporting (e.g. Norway)].

Energy management for SMEs • Step-wise implementation support [Provision of web-based implementation follow up (e.g. Ireland, Germany, United States)]; • Advice and first certification support; • Guidance for different branches [Providing energy management guidelines for specific branches (e.g. Spain)].

Exchange mechanisms for SMEs • Regular common exchange and follow-up for SMEs [Organization of various information sources and events as in many MS (e.g. conferences, workshops, helpdesks, etc.)]; • Ensuring institutional support [Cooperation with key institutions (e.g. business associations) for informing companies about the process as in many MS]; • Using a mix of approaches [Utilization of several approaches to cover a wide range of SMEs (e.g. Denmark) where appropriate].

Figure 6 - Overview of Challenges, Recommendations, Good-Practices, and Examples related to the Implementation of Article 8 of the EED 49

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Investing in Energy Project - An Environmental-Economic Report on the Implementation of Energy Efficiency Measures by Industry

Malta’s National Energy Efficiency Action Plan

In line with Article 24 of EED, the Maltese Government has prepared periodic National Energy Efficiency Action Plans (NEEAP). According to the EED, NEEAPs must be prepared every three years and must cover energy efficiency improvement measures and expected/achieved energy savings by the Member State in question. These NEEAPs are then reviewed by the European Commission who compares them to a number of energy efficiency targets, set out under Article 3(1) of the EED. Malta’s latest NEEAP, published in April 2017, gives an overview of Malta’s national energy targets as well as the savings that have been achieved. Subsequently, the NEEAP sets out policy measures related to the obligations of the EED. The document introduces the establishment of Malta’s Energy and Water Agency 50. This agency is responsible for designing, developing, and coordinating energy policies and measures. On the other hand, the Regulator for Energy and Water Services regulates practices, operations, and activities in the energy and water sector.

In terms of Malta’s energy roadmap, the NEEAP’s five main policy objectives are defined as: 1 Diversifying Malta's dependence on the importation of oil through the achievement of a diversified energy mix; 2 Reducing the carbon footprint and greenhouse gas emissions of the country through improved efficiency in generation capacity - replacement of heavy fuel oil with natural gas and gas oil, and renewable sources; 3 Enhancing and strengthening the security of supply of the country while ensuring the availability of appropriate back-up capacity;

49 50

Ibid.

As per Legal Notice 340 of 2016.

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4 Stimulating investment in renewable energy sources through the provision of appropriate incentives; and 5 Achieving a degree of interconnection for electricity supply and Overhauling the generation capacity of the country with a view to achieving higher efficiency gains whilst stimulating investment in natural gas infrastructures.

Within the NEEAP, an energy demand projection estimates that 822,903 toe of primary energy will be consumed in 2020. This figure was estimated by summing the projected energy demand related to fuel consumed by thermal plants; electricity imported through Malta’s interconnector; electricity generated through renewable energy sources; and projected non-electricity energy demand and factors in the estimated electricity and nonelectricity savings post 2015 (18,227 toe)

51.

The policy document interestingly reveals

that a financial scheme based on tax rebates is being or will soon be designed in order to support energy efficiency measures in various categories of the services and industrial sectors. This scheme is projected to save up to 100 Gigawatt hours (GWh) of energy by 2020.

6.4.1.1

Energy Audit and Management Systems

Part of the Energy and Water Agency’s remit is to promote, provide support, and ensure compliance by enterprises performing energy audits as per Article 8 of the EED. Approximately 1,110 energy audits and energy awareness assessments have been carried out between 2014 and 2016. In Malta, 96 non-SMEs have complied with their obligation to carry out an energy audit. Of these 96 enterprises, 64 non-SMEs were required to carry out the audit by 2015. The NEEAP disclosed that 60 non-SMEs have complied with their obligations by 2017. A further 28 large enterprises were exempt due to their relatively low energy consumption levels, and 4 were exempt due to energy

Office of the Prime Minister (Energy and Projects) (2017); Malta’s National Energy Efficiency Action Plan – April 2017; Available at: https://ec.europa.eu/energy/sites/ener/files/documents/mt_neeap_2017_en.pdf 51

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efficiency systems that they already have in place. The implementation of energy audits

by Non-SMEs was facilitated through a seven-page guidance note issued by the Office of the Prime Minister 52.

The NEEAP also makes reference to the collaboration between the Energy and Water Agency and the MBB, by describing the endeavour to negotiate voluntary agreements with Non-SMEs to promote the implementation of energy efficiency measures. This collaboration also extends to the Investing in Energy Project, which has been described by the NEEAP as a project which is “expected to facilitate the exchange of best practice relating to energy management systems in SMEs” 53.

6.4.1.2

Energy Efficiency measures in Economic Sectors

The Government has identified the: Manufacturing (NACE Code C); Wholesale and retail trade and repair of motor vehicles (NACE Code G); and the Accommodation and Food Services Sector (NACE Code I) as the three most energy consuming economic sectors.

With regard to energy efficiency measures targeting industry, the NEEAP makes reference to an Energy Efficiency Partnership Initiative. This initiative encourages organisations to enter into a voluntary agreement where they commit to implement measures to annually increase energy efficiency measures. In turn, businesses are recognised for their environmental responsibility and are allowed to use the initiative’s logo for marketing purposes.

52

Office of the Prime Minister (2017); Guidance Note on the Carrying out of Mandatory Energy Audits by non-SMEs; Available at: http://opm.gov.mt/en/energyprojects/Documents/Non%20SMEs%20Guidance%20Note%20Amended%20 version1.4.pdf 53 Office of the Prime Minister (Energy and Projects) (2017); Malta’s National Energy Efficiency Action Plan – April 2017; Available at: https://ec.europa.eu/energy/sites/ener/files/documents/mt_neeap_2017_en.pdf

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The Investment Aid for Energy Efficiency project aims to attract investment in projects to improve energy efficiency. An Energy Audit Voucher Scheme allows enterprises to apply for funding related to energy efficiency measures through tax credits.

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7. Economics Analysis

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This section of the report will present the methodology and results of the economics analysis undertaken by Equinox on the basis of data collected for the project by the MBB. The data was collected through the distribution of a questionnaire, which is presented hereunder.

7.1

Methodology of the Economics Analysis

In order to collect the data used to compile the results presented in Section 7.2 of this report, the Investing in Energy project team at the MBB designed a questionnaire, which the MBB distributed to a number of Maltese Non-SMEs after having obtained feedback from Equinox Advisory.

The questionnaire, which is being reproduced in Annex I, was intended to collect information about Non-SMEs’ obligations emanating from the article eight of the EED, as well as measures related to the EPBD and the RED II. It primarily seeks to gauge the effort made by Non-SMEs in complying with their obligations at law, as well as the costs and savings resulting from energy efficiency measures which they have in place. The data collected through these questionnaires was supplemented by interviews and a database was compiled from the responses thereto by the Investing in Energy project team at the MBB. Upon receiving the final dataset, Equinox Advisory coded, categorised and analysed the data, and evaluated its implications. This section of the report presents the results both qualitatively and quantitatively, and employs visual aids in order to facilitate a better understanding of the situation depicted. In this regard, a thorough analysis of each question was conducted based on the replies provided, supplemented by descriptive statistics wherever they made sense. The results presented in this report will provide an overview of the choices made by the various respondents, the associated comments and explanations given, as well as a general conclusion on each of the questions. Analysis

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was not conducted solely at an aggregate level, but also at the individual enterprise level in order to provide the reader with a thorough understanding of each respondent’s situation.

This exercise did give rise to various methodological issues. The first issue that needed to be addressed was where to draw the line between the comprehensiveness of the questionnaire (which boiled down to how long it had to be) and the likely response rate (which goes down proportionally with the length of the questionnaire). The number of results that the study managed to collect is, in fact, not statistically representative of the entire Non-SME sector, and much less is it representative of the SME sector.

Nevertheless, given that this data was never collected in the past, the results are very insightful notwithstanding the fact that they may give rise to more questions than they provide answers at this stage. In this respect and despite the best efforts of the the Investing in Energy project team at the MBB to maximise responses, it is worth noting that the sample size of data collected

54

was small in both absolute and relative terms,

and both cross-sectionally and over-time. This limits the applicability of the results to the sample itself and effectively results in a dataset that is not statistically representative of the entire statistical population of Non-SMEs. All in all, however, this exercise was an excellent first step in kick-starting a much needed process of domestic data collection and analysis that not only provides a first snapshot of the situation in a portion of the NonSME sector when it comes to energy efficiency, but also gives policy-makers a glimpse into the energy efficiency situation in Malta and gives them the basis on which to pose the right questions and to endeavour to find answers to such questions in future studies.

54

A sample size of 20 respondents.

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7.2

Investing in Energy Project - An Environmental-Economic Report on the Implementation of Energy Efficiency Measures by Industry

The Results

Out of the 55 Non-SMEs, which have been contacted during the field research phase of this project, 20 datasets were collected. These are not always complete as some items were left blank in some of the responses and in some cases information which is not comparable to the other datasets was provided 55.

The 20 enterprises that have participated in this study appear in Table 6 hereunder. Due to the commercial sensitivity potential of the data collected, all data was coded and anonymised such as to ensure that no response is traceable to any specific submission.

Table 6: Designated Company Number

Company Name

Company Name

Farsons

Baxter

Lufthansa Technik

Trelleborg Sealing Solutions Malta

Methode Electronics Malta Ltd. G4S Security Services (Malta) Ltd.

Maltapost Bank of Valletta

De La Rue Currency & Security Print Ltd.

BOV

IHG

Foster Clerk

Actavis db Seabank

Enemalta Hotset

Lombard Bank

DHL

Westin Dragonara

HSBC

The 20 Non-SMEs above have registered a combined total of 132 energy audit recommended measures. Due to incomplete replies from some of the respondents within the responding sample, 19 of these measures could not be accurately quantified in terms of costs and savings.

55

Such as text replies where a numerical reply was solicited.

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The quantifiable energy efficiency interventions have been categorised into: 1. Boiler; 2. Combined heat and power (CHP); 3. Climate Conditioning; 4. Education & Awareness; 5. Electrical efficiency of Equipment or Machinery; 6. Fuel Efficiency; 7. Insulation; 8. Lighting; 9. Photovoltaic Installations; 10. Procedure-related; 11. Rooftop; 12. Smart Building System; and 13. Water Heating.

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The most popular measures for Maltese Non-SMEs, if popularity is judged by instances of implementation, are Lighting; Electrical Efficiency of Equipment or Machinery; and Insulation interventions in that order of priority. The full picture by the number of instances of intervention and their corresponding percentages is shown in Figure 7 below.

Figure 7 – Energy Efficiency Actions

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Table 7 tabulates which of the 132 interventions by intervention category were new interventions and which ones were upgrade interventions. The data collected indicates that the preponderance of energy efficiency interventions made by non-SMEs were related to the upgrading of existing systems. This, however, does not apply invariably.

Exceptions were recorded in boiler, water heating CHP and insulation interventions were the majority of interventions constituted new investments.

Table 7: New and Upgraded Interventions per Intervention Type

Intervention Category

New Interventions

Boiler CHP Climate Conditioning Education & Awareness Electrical efficiency of Equipment or Machinery Fuel Efficiency Insulation Lighting Photovoltaic Installations Procedure-related Rooftop Smart Building System Water Heating Total

1 5 4 2

Upgrade Interventions N/A 1 6 2

9

25

1 6 7 4 1 1 N/A 5 46

1 5 26 5 1 4 10 N/A 86

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Figure 8 - New and Upgrade Interventions per Intervention Type Table 8: Cost of Carrying out Energy Audit

# 1 2 3 4 5 6 7 8 9 10 11 12 13

External Auditors 6,000.00 9,980.00 N/A 4,000.00 15,000.00 9,440.00 10,300.00 5,750.00 8,000.00 N/A 4,480.00 9,000.00 9,000.00

Internal Auditors N/A N/A 15,000.00 N/A N/A N/A N/A N/A N/A 200,000.00 N/A N/A N/A

ISO 14001 N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A

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The majority of Non-SMEs seem to have a preference for engaging external auditors to prepare energy audits on the basis of Article 8 of the EED. On average, an external audit costs EUR 7,580. The range for external audit expenses from the replies received to this project’s questionnaire is between EUR 4,000 to EUR 15,000. Responses relating to internal audit costs show a higher cost being incurred. However, this inference needs to be interpreted advertently as the results may be misrepresentative (for instance unapportioned costs representing the wages of internal auditors covering things in addition to energy might have been provided) and is based on just 2 responses, thereby severely limiting the breadth of this conclusion.

7.2.1

Cost Savings and External Benefits

From the cost savings data relating to energy efficiency interventions elicited from the project questionnaire, it transpires that at the aggregate level, the 113 interventions that were reported by industry respondents come at a cost EUR 6,712,811, while the annual savings resulting from these interventions were estimated at EUR 1,046,640.

There is some evidence that investments in energy efficiency measures compare favourably with investments in other energy sectors in terms of their impact on local job creation. Indeed, a study carried out in 2012 found that for every EUR 1,000,000 spent on energy efficiency measures, 19 new jobs are created

56.

Nevertheless, this is not a

study that focuses on Malta, so the results cannot be directly transposed and need to be taken to be indicative. Using the results of this study as a rule of thumb, 128 green job opportunities should have been created as a result of the energy-efficiency interventions carried out by the 20 participating Maltese non-SMEs.

56

The Energy Efficiency Industrial Forum (2012); How many Jobs? A Survey of the Employment Effects of Investment in Energy Efficiency of Buildings; Available at: http://www.eurima.org/uploads/ModuleXtender/Publications/87/EEIF_How_Many_Jobs_05_2012.pdf

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In terms of the external benefits generated from investments in energy efficiency measures, a report published in 2014 found that every Euro invested in energy efficiency generates between EUR 1.08 and EUR 3.48 57 in total economic benefits. These include avoided energy and capacity costs, lower energy costs during peak demand periods, avoided costs from building new power lines and reduced pollution

58.

If a conservative value of EUR 1.08 for every EUR 1 spent on energy efficiency measure is taken into account, the external benefit to society resulting from the energy efficiency interventions of the participating Non-SMEs amounts to EUR 7,249,836. However, this is likely to be underestimating the true extent of the economic benefits to society generated by these interventions, as the range is between EUR 7,249,836 and 23,360,582 and from studies in other sectors we know that the benefit-to-cost ratio in Malta for such interventions is rather high.

A breakdown of the energy-efficiency measures implemented by Non-SMEs, together with the costs and the savings of the interventions is provided in Table 9 hereunder and is graphically presented in Figure 9.

It is immediately evident that the bulk of the investment has taken place in the Photovoltaic area, which accounts for a whopping 67% of investment costs. This is followed by climate conditioning, lighting and water heating in that respective order. This picture makes for a significant conundrum. Energy investment literature provides convincing and wellsubstantiating and well-documented evidence that investments in energy saving provide a better return on investment than investments in renewable energy generation. The findings of the questionnaire for this project could be interpreted in several ways in the light of such evidence. Firstly, what we are seeing could be a result of Government policy intended to spur investment in renewables with a view to meeting the national 2020 targets, which through the provision of fiscal incentives, end up distorting market signals 57

Using a U.S Dollar to Euro exchange rate of 0.87 American Council for an Energy-Efficiency Economy (2014); The Best Value for America’s Energy Dollar: A National Review of the Cost of Utility Energy Efficiency Programs; Available at: http://aceee.org/node/3078?id=5189 58

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and altering the mix of the investments that would have been undertaken in the absence of such fiscal schemes. It could also be the result of a situation where within the sampled entities, the more economic energy saving opportunities have all been undertaken and the next-best series of investments available to these Non-SMEs lies in renewables.

Both hypotheses could make logical sense when juxtaposed to the number of interventions per category. In fact, there are many more interventions in energy saving interventions such as Lighting and Electrical efficiency of Equipment or Machinery than there is in Photovoltaics (this can be clearly seen from the Pie Chart presented in Figure 7 on page 20), although the amount invested in the latter by far dwarfs all the other investments put together.

From the responses elicited through the questionnaire it is impossible to determine which one of the two hypotheses posited above is at play, or whether it is the caser that both hypotheses are true and contributing to the end result captured by the snapshot taken by this study. Nevertheless, whatever the case, the policy implications are clear. More needs to be done to incentivise energy saving before renewable generation after ensuring that the 2020 goals are achieved and perhaps more effort should be devoted to rationalise Malta’s situation in negotiations with the European Commission when it comes to goalsetting and allocation of funding with a view to ensuring that the Maltese society is getting the best return on investment on its investment expenditure.

In Figure 10 we present the other side of the coin in terms of investments: the annual savings enabled by the investments undertaken. It is clear that while, as expected due to the magnitude of the investment undertaken, Photovoltaics represent the highest level of savings, the proportions of savings between intervention categories are very different from the ones presented in Figure 9. Superimposing Figure 9 and Figure 10 to see this better, one can also be able to get a glimpse of the interventions that have the highest savings-to-cost ratio. This superimposition is presented in Figure 11, where Lighting, Water Heating and Electrical Efficiency of Equipment and Machinery come on top in terms of the savings-to-cost ratio with a clearly superior payback period.

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Table 9 : Energy Efficiency Measures Implemented by Non-SMEs

Type of Energy Efficiency Intervention Boiler CHP Climate Conditioning Education & Awareness Electrical efficiency of Equipment or Machinery Fuel Efficiency Insulation Lighting Photovoltaic Installations Procedure-related Rooftop Smart Building System Water Heating Grand Total

Number of Actions 1 6 10 4

Cost of Interventions (EUR) 60,000 80,000 567,200 40,000

23

303,933

132,541

2 10 32 5 2 5 9 4 113

170,000 50,480 455,422 4,484,173 20,000 75,228 183,775 222,600 6,712,811

9,000 19,941 197,677 423,091 5,486 9,446 48,300 108,300 1,046,604

Figure 9 - The Cost per Type of Intervention

Savings (EUR) 10,000 26,281 55,041 1,500

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Figure 10 - Saving made per Type of Intervention

Figure 11 - A Comparison between the Cost and Savings per Intervention Type

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At a microeconomic level of analysis, Table 10 outlines the number of interventions carried out at each of the 20 firms whose response was elicited through this project. The company names are anonymised so as not to disclose potentially commercially-sensitive information, as well as due to data protection considerations. Two Non-SMEs have implemented a total of 24 energy efficiency interventions each, effectively making them outliers within the sampling group. The second largest number of interventions recorded by another company was 13 interventions.

Although these three companies have implemented the highest number of energy efficiency interventions, it was another company that recorded the highest expenditure on energy efficiency interventions at EUR 3,061,058 for a total of five interventions. This considerable investment was largely due to the specific company’s decision to undertake a major project related to a PV installation costing a total of EUR 2,934,173. On average, the number of intervention activities per company stood at 6.8 with a median of 5, a standard deviation of 6.4, a Kurtosis of 4.2 and a Skewness value of 2.2.

Table 11 and Table 12 subsequently provide granular data by company as to the cost of the interventions undertaken by type of intervention.

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Table 10: Number of Interventions per Type per Company

Type of Intervention

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

Boiler CHP Climate Conditioning Education & Awareness Electrical efficiency of Equipment or Machinery Fuel Efficiency Insulation Lighting Photovoltaic Installations Procedure-related Rooftop Smart Building System Water Heating Grand Total

1 1 1 -

-

1 -

-

-

1 2 -

1

1 -

1 1

2 -

1 -

-

1 -

1 1 -

1

1 -

-

-

1

1 -

-

1

1

-

6

1

1

-

2

1

2

3

-

-

1

4

-

2

2

9

1 1 5

1 1 1 1 5

4 1 7

1 1 2

5 3 1 4 4 1 24

1 5

1 1 1 1 6

1 1 3

1 1 1 7

1 1

-

1 1 1 6

-

2 1 5

1 3

1 3 1 3 13

1 1 2

1 1 4

1

1 9 4 24

1 6

1 4

1

4

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Table 11: Cost of Intervention per Company (First 10 companies)

Type of Intervention Boiler

1 60,000 Cost not provided

2 N/A

3 N/A

4 N/A

5 N/A

6 N/A Cost not provided

7 N/A

8 N/A

9 N/A

10 N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

High

Climate Conditioning

120,000

N/A

0

N/A

N/A

135,000

N/A

15,000

Cost not provided

N/A

Education & Awareness

N/A

N/A

N/A

N/A

N/A

N/A

Cost not provided

N/A

40,000

N/A

Electrical efficiency of Equipment or Machinery

N/A

3,035

1,000

N/A

50,72359

95,000

51,500

N/A

Fuel Efficiency

N/A

N/A

N/A

170,000

N/A

N/A

N/A

N/A

Insulation Lighting

N/A 6,000

7,100 97,322

N/A 85,800

N/A 6,000

9,880 10,57060

N/A N/A

16,000 19,500

N/A 30

Photovoltaic Installations

400,000

2,934,173

N/A

N/A

800,000

N/A

N/A

N/A

Procedure-related Rooftop Smart Building System Water Heating Grand Total

N/A N/A N/A N/A 586,000

N/A 19,428 N/A N/A 3,061,058

N/A N/A 1,500 N/A 88,300

N/A N/A N/A N/A 176,000

N/A 55,80061 45,075 5,100 977,148

N/A N/A N/A 35,000 265,000

N/A N/A 107,200 2,500 196,700

N/A N/A N/A 180,000 195,030

CHP

59

Out of the 6 recorded Electrical Efficiency of Equipment or Machinery interventions recorded for Company 5, 5 costs were provided.

Out of the 3 recorded Lighting interventions recorded for Company 5, 2 costs were provided.

61 Out of the 4 recorded Rooftop interventions recorded for Company 5, 2 costs were provided.

60

Cost not provided Cost not provided N/A 9,650 Cost not provided N/A N/A N/A N/A 49,650

Med N/A Med Low N/A N/A N/A High -

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Table 12 - Cost of Intervention per Company (Next 10 Companies)

Type of Intervention Boiler CHP Climate Conditioning

11 N/A N/A 1,200

12 N/A N/A N/A

13 N/A N/A 240,000

14 N/A High Medium

Education & Awareness

N/A

N/A

N/A

N/A

14,000

72,000

N/A

N/A

N/A

N/A Cost not provided

N/A

N/A

15 N/A N/A N/A Meter 4,000 and 350 per branch Circa 65,000 per branch N/A

N/A

N/A

N/A

2,000

Electrical efficiency of Equipment or Machinery Fuel Efficiency

16 N/A 80,000 N/A

17 N/A N/A N/A

18 N/A N/A N/A

19 N/A N/A N/A

20 N/A N/A 56,000

N/A

N/A

N/A

Cost not provided

N/A

15,00062

N/A

1,600

7563

N/A

N/A Cost not provided Cost not provided

N/A

N/A

Cost not provided N/A

N/A

N/A

15,500

2,500

N/A

155,550

Insulation

N/A

Lighting

4,500

13,000

N/A

Mixed64

50 per panel

45,000

Photovoltaic Installations

N/A

N/A

N/A

N/A

N/A

N/A

N/A

350,000

N/A

Procedure-related Rooftop Smart Building System

N/A N/A N/A

N/A N/A N/A

Low N/A N/A

N/A N/A N/A

Water Heating

N/A

N/A

N/A

N/A

20,000 N/A 30,00065 N/A

N/A N/A N/A N/A

N/A N/A N/A N/A

N/A N/A N/A N/A

Grand Total

19,700

N/A N/A N/A Cost not provided 85,000

Cost not provided N/A N/A N/A N/A

240,000

-

-

192,000

-

354,100

75

227,050

62

Out of the 3 recorded Electrical Efficiency of Equipment or Machinery interventions recorded for Company 16, 1 costs were provided.

Out of the 2 recorded Electrical Efficiency of Equipment or Machinery interventions recorded for Company 19, 1 costs were provided.

64 One intervention was marked as “high” and another as “low”.

65 Out of the 2 recorded Smart Buildings System interventions recorded for Company 16, 1 costs were provided.

63

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In order to estimate the average cost and savings of each intervention, the number of actions implemented in each category were divided by the total cost and total savings per type of intervention respectively. The payback period for the investments have also been calculated by dividing the investment cost by the savings.

Table 12 confirms our previous conclusion that, in absolute terms, on average, PV Installations are the most expensive type of intervention costing EUR 896,835 per intervention and thus obviously result in the highest savings per intervention with an estimated EUR 84,618 being saved per intervention.

Taking a relative point of view based on proportions, on the other hand, it is clear that all intervention categories with the exception of Education & Awareness and Fuel Efficiency result in better payback periods and this is especially the case with Electrical efficiency of Equipment or Machinery, Lighting and Water Heating. This is not to say that Return on Investment (ROI) is necessarily better in almost all intervention categories than they are on Photovoltaic Installations. For one thing, distortionary fiscal incentives might be present in cost data and this could significantly alter the ROI parameters, and for another ROI is a function not only of cost and annual savings but also of the useful economic life of the equipment and the discounting rate used.

It is further to be noted that in the case of investment in boilers, which results to be the second most expensive energy efficiency measure, only one intervention was recorded through the MBB’s survey and this is therefore even less representative of the general costs and savings of the interventions in this category that might be taking place throughout industry. A list of the interventions sorted by payback period in ascending order (i.e. with investment categories presenting the lowest payback periods appearing first, followed by those with longer payback periods) is presented in Table 15. With the notable exception of Education & Awareness, this ordered list is generally consistent with expectations based on literature findings. The very low ranking of Education & Awareness in terms of payback, however, is an idiosyncrasy and is highly discordant with

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expectations based on literature. It therefore merits some closer attention and the formulation of a few thoughts on the underpinnings of his result.

Unlike other interventions, Education & Awareness is not very amenable to precise measuring. Whereas a lighting installation, a boiler or more generally an electrical component can have its electricity consumption measured with precision through metering equipment, the impact of Education & Awareness might not be directly evident as any savings accruing from such activities may easily be attributed to other factors.

Because of this reason, this study could not come to a conclusion as to whether the result for Education & Awareness is merely a feature of measurement difficulties that is biasing the results, or whether it is something that has been captured accurately in the survey, in which case it would mean that Malta is doing something fundamentally wrong in its Education & Awareness initiatives.

Logically, Education & Awareness, when properly addressed and properly measured, should result to have one of the biggest impacts on energy efficiency. Even simple awareness as to the most effective investment categories can make a very significant impact on ROI as usually such awareness forms the basis for investment allocations within firms. However, this might simply be a case of indirect impacts that are showing up under other investment categories. By way of illustration, if a person who has been designated as the one responsible for energy efficiency investments within a Non-SME had to know that investments in Water Heating provide the shortest payback period and on the basis of that knowledge s/he had to lead the firm’s investment strategy in that direction, the impact would appear under the Water Heating investment category. In actual fact, if we wanted to be economically accurate and precise, the difference between the cost-savings ratio between investment in Water Heating and investment in any other category of investment that would have been undertaken in the absence of the awareness of the designated person due to Education & Awareness initiatives should be attributed to Education & Awareness. This is unlikely to be the case here, as to capture this effect, a much more sophisticated and complex questionnaire would have been required. The

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results attributed to Education & Awareness are therefore likely to be more of a feature of the study itself than one that is present in industry. On this showing, we would therefore recommend a more detailed investigation of this phenomenon in subsequent studies in this area.

Table 13: The Average Cost and Savings per Individual Intervention

Type of Intervention

Number of Actions

Boiler CHP Climate Conditioning Education & Awareness Electrical efficiency of Equipment or Machinery Fuel Efficiency Insulation Lighting Photovoltaic Installations Procedure-related Rooftop Smart Building System Water Heating

1 6 10 4 23

Cost per Intervention (EUR) 60,000 13,333 56,720 10,000 13,214

2 10 32 5 2 5 9 4

85,000 5,048 14,232 896,835 10,000 15,046 20,419 55,650

Savings per Intervention (EUR) 10,000 4,380 5,504 375 5,763

Payback Period (Years) 6.0 3.0 10.3 26.7

4,500 1,994 6,177 84,618 2,743 1,889 5,367 27,075

18.9 2.5 2.3 10.6 3.6 8.0 3.8 2.1

2.3

A breakdown of the Investment status for the data collected by this exercise and their associated costs and savings are tabulated hereunder in Table 14.

Table 14: Investment Cost by Status

Status

Decision pending Done Funding unavailable Funding / NS Implementing At The Moment Not scheduled

Investment Cost (Euros)

90,325 65,075 447,000 35,000 669,030 415,592

Savings (Euros)

26,281 5,486 0 10,800 257,900 127,900

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Operational issues Other Scheduled for Implementation No Response Total

145,452 35,529 4,582,758 227,050

554,752 27,185

6,712,811

1,046,604

36,300

Table 15: Intervention Areas With Payback Periods Ordered In Ascending Order

Type of Intervention

Water Heating Electrical efficiency of Equipment or Machinery Lighting Insulation CHP Procedure-related Smart Building System Boiler Rooftop Climate Conditioning Photovoltaic Installations Fuel Efficiency Figure 12 below provides the absolute levels of costs and savings per intervention for all energy efficiency investment categories, whereas Figure 13 below it provides the same thing without the Photovoltaic category so as to give a better idea of the distribution while removing the scaling effect of Photovoltaics investment on the chart itself.

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Figure 12 - Cost and Savings per Individual Intervention

Figure 13 - Cost and Savings per Individual Intervention (Excluding PVs)

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Figure 14 - Payback Period per Individual Intervention (Years)

Figure 14 depicts each intervention’s average payback period

66

and thus provides a

visual aid to Table 13 and Table 15. The results have been commented on in preceding parts of this section of the report.

66

This is calculated as the average period of time (in years) it takes for average annual savings per intervention to cover the average cost per intervention.

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Table 16: Savings per Company (First 10 Companies)

Type of Intervention Boiler

1 10,000 Not Provided

2 N/A

3 N/A

4 N/A

5 N/A

N/A

N/A

N/A

N/A

Climate Conditioning

15,000

N/A

16,500

N/A

Education & Awareness

N/A

N/A

N/A

Electrical efficiency of Equipment or Machinery

N/A

6,900

Fuel Efficiency

N/A

Insulation

N/A Not Provided Not Provided N/A N/A N/A N/A 25,000

CHP

Lighting Photovoltaic Installations Procedure-related Rooftop Smart Building System Water Heating Grand Total

6 N/A Not Provided

7 N/A

8 N/A

9 N/A

10 N/A

N/A

N/A

N/A

N/A

N/A

13,810

N/A

Not Provided

N/A

N/A

N/A

N/A

N/A

1,500

N/A

26,000

N/A

N/A

1,400

40,500

N/A

N/A

N/A

9,000

N/A

N/A

N/A

N/A

10,767

N/A

N/A

N/A

N/A

8,400

N/A

Not Provided Not Provided Not Provided N/A

68,895

73,900

1,200

N/A

N/A

7,000

7,000

3,194

374,332

N/A

N/A

N/A

N/A

N/A

N/A

N/A 9,446 N/A N/A 470,340

N/A N/A 12,000 N/A 128,400

N/A N/A N/A N/A 10,200

N/A N/A N/A N/A N/A

N/A N/A N/A 10,800 26,010

N/A N/A 36,300 2,500 96,200

N/A N/A N/A 95,000 102,000

Not Provided N/A N/A N/A N/A 3,194

N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A

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Table 17: Savings per Company (Next 10 Companies)

Boiler

11 N/A

12 N/A

13 N/A

CHP

N/A

N/A

N/A

Climate Conditioning

1,145

N/A

Education & Awareness

N/A

Electrical efficiency of Equipment or Machinery Fuel Efficiency

15 N/A

16 N/A

17 N/A

18 N/A

19 N/A

20 N/A

N/A

26,281

N/A

N/A

N/A

N/A

Not Provided

14 N/A Not Provided Not Provided

N/A

N/A

N/A

N/A

N/A

8,586

N/A

N/A

N/A

Not Provided

N/A

N/A

N/A

6,739

37,600

N/A

N/A

9,729

N/A

3,673

N/A

N/A Not Provided

N/A

N/A

N/A

N/A

N/A

N/A

N/A Not Provided Not Provided

Not Provided N/A Not Provided

N/A

Not Provided Not Provided N/A

Not Provided N/A

N/A

N/A

774

1,852

Not Provided

17,825

N/A

Insulation

N/A

Lighting

839

5,000

N/A

Not Provided

0

10,97267

Photovoltaic Installations

N/A

N/A

N/A

N/A

N/A

N/A

N/A

48,759

N/A

Not Provided

Procedure-related

N/A

N/A

N/A

N/A

5,486

N/A

N/A

N/A

N/A

Rooftop

N/A

N/A

N/A

Not Provided N/A

N/A

N/A

N/A

N/A

N/A

Smart Building System

N/A

N/A

N/A

N/A

N/A

N/A Not Provided

N/A

N/A

N/A

N/A

Water Heating

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

Grand Total

8,723

N/A

N/A

9,729

42,739

N/A

54,284

N/A

27,185

67

Not Provided 42,600

Out of the 3 Lighting interventions recorded by company 16, 2 provided savings figures.

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In order to disaggregate the results of the analysis undertaken for this project further at company level, Table 16 and Table 17 tabulate the annual savings per intervention and per company. Again, due to data protection and commercial sensitivity issues, all the data has been anonymised. The highest annual savings resulting from the implementation of energy efficiency measures registered totalled EUR 470,340, whereas the lowest saving measured totalled EUR 3,194 per annum.

Figure 15 - Preferred Payback Period in Years

The survey also included questions related to the sampled company’s ideal Payback Period (framed in terms of how long the ideal and the maximum acceptable period of time within which to get a Return on Investment was). From the responses obtained, the average ideal payback period for energy-related investments was calculated as 1.71 years while the average maximum acceptable Payback Period was determined to be 2.94 years. The distribution of responses by company are shown in Figure 15 together with the respective averages represented by the horizontal lines.

It is immediately clear that both ideal payback periods and maximum acceptable payback periods are very short. So short, in fact, that for 11 out of the 19 responses for this question, it would not have made sense to invest in any category of measures,

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not even the most efficient one in terms of payback period (Water Heating). This is in stark contrast to the investments that have actually been undertaken and represents another conundrum being given rise to by this study that the study itself is not able to shed light on, viz. why is investment in energy saving measures taking place when respondents’ notional maximum acceptable payback period is shorter than that for the most efficient category of investment?

7.2.2

Energy Savings

This section of the report presents the non-monetary energy saving results arising from the each of the energy-efficiency interventions being considered, as per the energy audits performed. The savings are mainly estimated in Kilowatt Hours (kWh) which is a composite unit of energy. The highest energy savings recorded (relative to energy drawn from the grid) were those resulting from PV installations, with an estimated annual reduction of 2,067,049 kWh. This is to be expected given the proportion of the total investment that has gone into this intervention area. Moreover, a total of 7,768,278 kWh were saved in total from the other (i.e. non-PV) energy efficiency measures being considered for this study. This makes for a total of 9,835,327 kWh having been saved from being drawn from the national electricity grid.

Table 18 : Sum of kWh Savings per Intervention Type

Type of Intervention Boiler CHP Climate Conditioning Education & Awareness Electrical efficiency of Equipment or Machinery Fuel Efficiency Insulation Lighting Photovoltaic Installations

Sum of kWh savings 219 256,537 13,500 2,193,283 502,142 1,763,158 2,067,049

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Procedure-related Rooftop Smart Building System Water Heating Grand Total

46 353,269 830,165 1,855,960 9,835,327

Table 19 : Sum of kWh Savings per participating Non-SME

Company 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

Sum of kWh savings 344,833 1,029,190 1,127,000 7,000 3,551,671 290,000 837,260 1,663,200 21,000 72,690 380,350 54,001 91,709 365,424 -

At a disaggregated level, the survey results show that one particular company has managed to attain annual energy savings estimated at 3,661,671 kWh per annum and representing a considerable 36% share of the savings recorded by the sampled entities, largely due to its significant stock of energy-efficient systems and measures.

The entity that managed to take runner up position on this statistic, in contrast managed to attain savings of 1,663,200 kWh per annum representing a 17% share of the savings recorded by responding Non-SMEs. However, this second figure is at best likely not to be accurate as it represents a saving for this entity that is higher than the electricity consumption reported by the entity itself for both 2015 and 2016.

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Table 20 : The Sum of 2015 and 2016 kWh Consumption

Company 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

Sum of 2015 Consumption (kWh) 7,623,695 2,657,040 18,323,400 164,028 10,951,557 7,533,900 12,300,000 438,741 495,757 5,947,148 6,698,500 13,595,000 1,700,700 8,176,315 4,455,000 478,061 1,014,526 492,000 83,631 1,594,000 104,722,999

Sum of 2016 Consumption (kWh) 7,669,755 2,092,140 17,646,700 162,300 10,134,183 9,982,280 12,300,000 446,211 467,914 6,136,691 5,324,700 12,870,000 1,593,968 8,049,158 5,179,000 452,898 880,364 541,000 79,089 N/A 102,008,351

Table 20 tabulates each responding company’s total energy consumption for 2015 and 2016. When comparing the companies’ energy consumption in kWh over the twoyear period, the total consumption of energy fell by 2,714,648 kWh. This aggregate may hide the fact that not all respondents actually managed to reduce their consumption. In fact, while overall the reductions have more than offset the increases, 6 out of 19 respondents to this question have actually registered an increase in energy consumption, with the remaining 13 respondents having registered a decrease. This situation is illustrated graphically in Figure 16.

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Figure 16 - Comparison between 2015 and 2016 Consumption (kWh)

Table 21 compares the annual energy savings recorded by each of the 20 enterprises to their registered annual consumption of energy. The highest credible energy savings rate as a percentage of total energy consumption registered is 67.55%. Another figure that has been provided and which works out to a savings rate of 372.74% is clearly wrong on the basis that it is impossible for any firm to save more energy than it consumes. It is not clear whether the error in this datum is limited to energy savings reported or whether there could be additional errors in the associated data from the same respondent firm.

Table 21: The Amount of Energy Saved as a percentage of Consumption per Company

Company

Sum of 2016 Consumption (kWh)

Sum of kWh savings

Percentage Share

1 2 3 4 5

7,669,755 2,092,140 17,646,700 162,300 10,134,183

344,833 1,029,190 1,127,000 7,000 3,551,671

4.50% 49.19% 6.39% 4.31% 35.05%

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6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

7.2.3

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9,982,280 12,300,000 446,211 467,914 6,136,691 5,324,700 12,870,000 1,593,968 8,049,158 5,179,000 452,898 880,364 541,000 79,089 N/A

290,000 837,260 1,663,200 21,000 N/A 72,690 380,350 N/A N/A 54,001 91,709 N/A 365,424 N/A N/A

2.91% 6.81% 372.74% 4.49% N/A 1.37% 2.96% N/A N/A 1.04% 20.25% N/A 67.55% N/A N/A

Company Premises

This section of the report will focus on the use of Renewable Energy Sources (RES).

Given that some of the surveyed companies have multiple premises, a total of 32 replies were received to the question “Do you have any Renewable Energy Sources (solar/wind) producing installations?� Out of the 32 sites captured by the responses, 15 are equipped with RES installations, as shown in Table 22 and Figure 17 below.

Table 22: The Use of Renewable Energy Sources at Company Premises

Company No. 1 2 3 4 5 6 7 8 9 10

RES Present Yes No No No No Yes Yes No No No

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11 12 13 14 15 16

17

18 19 20

Yes Yes Yes Yes Yes No No No Yes Yes No No No No No No Yes Yes Yes Yes No Yes

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Figure 17 - Share of Non-SMEs using RES

When replying to the question “Does your building have an energy performance certificate?�, 5 respondents answered yes (24%) while 16 respondents answered no (76%), as illustrated in Table 23 and Figure 18 hereunder.

Table 23, in fact, compiles the information at the non-SME level, rather than at the premises level. Although the average building age is equal to 41.73 years, once a statistical outlier 68 is removed, the average age falls to 24.68 years. The median age is 19 years, whereas the standard deviation, skewness and Kurtosis values, in that respective order, are 87.2, 4.3 and 19. It is also worth noting that the correlation between building age and the number of years that have passed since the last renovation is - 0.13, which means that there is a weak relationship where older buildings have had to be renovated more recently. The correlation changes to - 0.33 when the next due renovation (in years) is included instead of the last renovation (in years). This means that the older the building the sooner the next renovation needs to take place and the relationship, while not being very strong (correlation can take Company 9’s premises which is 417 years old and which therefore has considerable leverage on the arithmetic mean.

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values of anything between 0 and 1), it is stronger than the relationship between the last renovation and the building age.

The same table features data related to past and planned building renovations.

Although most of the responding enterprises do not seem to have any renovations planned, others are awaiting authorisation or carry out renovations on an annual basis.

Figure 19 illustrates the expected number of years for the next renovation for those providing a reply to this question. Only six Non-SMEs have concrete plans to embark on major renovation projects in the coming years at their premises, with five intending to carry out such projects in the next two years and with another one projecting to commence a renovation project in 4 years’ time.

Table 23: Data related to each Company's Premises

Company 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16

Building Age (Years) (blank) 9 24 6 42 15 3 23 41 17 18 417 21 14 47 16 67 26 (blank) 7 10 19

Year of Last Major Renovation

Year of Next Major Renovation

Various 2014 2016 2011 Currently renovating 2015 (blank) (blank) 2016 2013 - 2014 2015 2015 2006 Regular Maintenance Regular Maintenance N/A 2007/8 (blank) 2011 (blank) (blank) (blank)

2019 None Planning for MEM 5 To be decided In process 2021 / 2022 (blank) (blank) on-going N/A 2017 2017 2018 Renovations each year Renovations each year N/A 2018/2020 (blank) awaiting authorisation (blank) (blank) (blank)

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17

61

18 19 20

47 10 (blank)

Refurbishment at MPS in 2009 + shifting to Marsa Regional office from 2 districts (Valletta and Paola) in 2016 2014 N/A (blank)

Figure 18 – Energy Performance Certificates

Not Planned Not Planned 2017 Q4 (blank)

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Figure 19 - Next Renovation in Years

Figure 20 depicts each plant’s capacity in terms of kiloWatt peak (kWp). Since a particular respondent registered a very high plant capacity following a massive PV rollout, Figure 21 depicts each plant’s capacity after the outlier has been removed to give a better sense of distribution after removing the scale effect that the outlier has on the chart’s y-axis.

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Figure 20 - The Peak Power per Building

Figure 21 - The Peak Power per Building (Outlier Removed)

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Figure 22 to Figure 24 take a look at each respondent’s roof area and its current occupancy levels in order to determine each company’s current stock of PV installations relative to roof space available, as well as their potential to invest in PV capacity in the future.

Figure 22 provides the distribution of total roof area between sampled Non-SMEs whereas Figure 23 provides the roof area occupied by solar installations. Both Figures provide values in Squared Meters. Figure 24 and Figure 25 then try to combine the two views provided in Figure 22 and Figure 23 to provide the total roof area in squared meters together with the percentage of the roof space occupied by solar installations.

This should give a good idea both with respect to current roof utilisation for RES and also with respect to potential future deployment.

It should be immediately evident that a significant number of non-SMEs have a good proportion of roof space available for PV installations and that two of these Non-SMEs have already utilised a 100% of their roof space. These have been removed form the availability metrics shown in Figure 25.

When asked whether they plan to install new or additional solar energy systems within the next two years, 50% of the respondents (10 respondents) answered in the affirmative while the remaining 50% (10 respondents) stated they had no such plans.

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Figure 22 - Total Roof Area in Squared Meters

Figure 23 - Roof Area Occupied by Solar Installations in Squared Meters

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Figure 24 - Total Roof Area in Squared Meters and Percentage Occupied by Solar Installations

Figure 25 - Roof Area Available for Solar Installations

The size of the planned systems measured in kWp for each company answering in the affirmative has been tabulated in Table 24 hereunder. Total capacity increases from

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respondents is expected to amount to 1,102,680 kWp. 99.2% of this increase in RES capacity is expected to be accounted for by a single Non-SME.

Table 24: Planned Solar Energy Installations

1 2 3 5 10 12 15 16 16 17 18

Solar energy installation in next 2 years

Size of planned solar in next 2 years (kWp)

Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes

400 1,094,720 1,000 625 200 120 9 178 229 5,000 199

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8. Conclusion

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The Investing in Energy Project led by the MBB in association with the Malta Chamber of Commerce and the Agency of Energy and Water, aims to improve the uptake of energy efficiency measures by Maltese enterprises.

In that spirit, this study is a first attempt at taking a snapshot of the energy efficiency situation in Malta, primarily addressing the EED, but which also takes into account the ancillary RED II and EPBD. This project sought to collect and analyse primary data in an attempt to analyse the economic impact, both in terms of costs and benefits, attributed to compliance of Maltese Non-SMEs obliged to comply with Article 8 of the EED. In taking this snapshot, the present study has first delved into the macroeconomic, regulatory and policy contexts, following which it has undertaken an economics analysis that tries to compile the results of the survey

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carried out by the MBB. The

analysis takes into account the replies of twenty non-SMEs and provides a glimpse of the current state of affairs in terms of the implementation of energy efficiency measures among Maltese non-SMEs, their typologies, their cost-effectiveness and their distribution among responding firms.

The results include both aggregated and disaggregated overviews of the financial costs and savings, as well as the energy savings resulting from energy efficiency measures implemented by non-SMEs in Malta. The economic analysis section also assesses the effect of these measures on the Maltese economy through an attempt at estimating the number of green jobs created and the external benefits generated from energy efficiency expenditure.

The economics analysis also looks at the use, capacity utilisation and potential for RES. Although the MBB’s survey was sent to 55 Non-SMEs, with a number of follow-ups having been undertaken, only twenty complete datasets were collected. Since the total number of complete datasets is not and cannot be statistically representative, the 69

Available in Annex I.

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results of this analysis are not easily extendible to the rest of the sector and may therefore be said to be representative only of the responding subset of Non-SMEs. A number of other issues that arose only after the data collection endeavour might also have a bearing on the snapshot provided and a number of assumptions and caveats have had to be made in order to compile the report.

Since the data collected was only collected once and since the sample was not a statistically representative sample, the confidence level and the statistical significance of the results obtained may have diminished.

The lack of past data was also a considerable issue, as this prevented the report from carrying out any sort of time-series analysis (with the exception of those few instances where chronological data was asked of the respondents) that would have allowed for trend analysis and the estimation of fixed and random effects within statistically representative datasets.

These issues highlighted above are not distinctive of this report alone, but are usually present in all studies being undertaken for the first time, especially those making use of elicited responses.

All in all, notwithstanding the fact that this report may give rise to more questions than it provides answers, this report surely has value in that it provides a much-needed snapshot that fills a gap that local policy-makers and businesses themselves have found when it comes to local energy efficiency empirical literature. It also provides the right framework within which to ask the right questions to attempt to answer in the next round of studies in this line and constitutes the first step in the construction of a timeseries dataset that might eventually allow for better statistical measures to be produced as this dataset becomes richer with the passage of time. Indeed, if the data collected through this exercise had to be collected periodically, Maltese policy makers should be able to use subsequent editions of this report as a policy-making tool that provides insights that will help shape Malta’s efforts to improve the level of energy efficiency both in the segment of its largest enterprises and also within the segment of smaller enterprises.

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Given this, it would be in order to conclude this study by highlighting the salient questions that this report gives rise to and for which answers may be attempted in future editions of this study.

In terms of the more important questions that subsequent studies might attempt to answer, one finds the following: •

To what extent do the results presented here represent the Non-SME sector and the SME sector?

•

To what extent have efficiencies in the more payback-efficient categories of investment (Water Heating, Electrical efficiency of Equipment or Machinery, Lighting and Insulation) been exhausted? If such opportunities have not been exhausted, should policy be targeted to divert investment from other areas to these areas, and if so what is the best way to do it?

•

How accurately are impacts deriving from Education & Awareness initiatives being captured? Is Education & Awareness having spillover effects on the household sector? If so, would this qualify as a merit or public good and how can central authorities help in ensuring that this is provided at socially-optimal levels if this is the case?

•

What is the useful economic life of the investment categories identified, and what is the ROI of each investment category at a reasonable discounting rate of, say, 4 %?

•

What should the role of RES be beyond meeting statutory targets? Is it economically-efficient to incentivise RES beyond this point or should the strategy at the country level be to go for other investments that can give more bang for the buck before going for RES? Where does this leave us with Malta’s negotiating position for future EU-deriving targets and what should Malta’s optimal negotiating position be?

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9. References

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References •

Equinox Advisory Ltd.‘s internal Guidelines for conducting Economic Impact Assessments

The following documents and articles were consulted for the purpose of the preparation of this research report: •

American Council for an Energy-Efficiency Economy (2014); The Best Value for America’s Energy Dollar: A National Review of the Cost of Utility Energy Efficiency Programs;

•

Directive 2009/125/EC of the European Parliament and of the Council of 21 October 2009 establishing a framework for the setting of ecodesign requirements for energy-related products;

•

Directive 2009/28/EC of the European Parliament and of the Council of 23 April 2009 on the promotion of the use of energy from renewable sources and amending and subsequently repealing Directives 2001/77/EC and 2003/30/EC;

•

Directive 2010/30/EU of the European Parliament and of the Council of 19 May 2010 on the indication by labelling and standard product information of the consumption of energy and other resources by energy-related products;

•

Directive 2010/31/EU of the European Parliament and of the Council of 19 May 2010 on the energy performance of buildings;

•

Directive 2012/27/EU of the European Parliament and of the Council of 25 October 2012 on energy efficiency, amending Directives 2009/125/EC and 2010/30/EU and repealing Directives 2004/8/EC and 2006/32/EC;

•

EU LIFE+ (2014); Final Report; EU LIFE+ Investing in Water Project;

•

European Commission (2011); Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions; A Resource-Efficient Europe – Flagship initiative under the Europe 2020 Strategy;

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•

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European Commission (2011); Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions; Energy Efficiency Plan 2011;

•

European Commission (2016); A Study on Energy Efficiency in Enterprises: Energy Audits and Energy Management Systems;

•

European Commission (2016); An EU Strategy on Heating and Cooling {SWD(2016) 24 final};

•

European Commission (2016); Clean Energy for All Europeans – unlocking Europe's growth potential Press Release;

•

European Commission (2017); Energy Union and Climate Priorities;

•

European Commission (2017); Good Practices in Energy Efficiency for a Sustainable, Safer, and more Competitive Europe;

•

European Commission (2017); Obligation Schemes and Alternative Measures;

•

Eurostat (2017); Energy Dependence %

•

Eurostat (2017); Energy Dependence %;

•

Eurostat (2017); Energy Intensity of the Economy %;

•

Eurostat (2017); Energy Intensity of the Economy (kgoe per 1000 EUR);

•

Malta Business Bureau (2015); The Potential for Energy and Water Savings within the EU through Flow Rate Regulation and Greywater Treatment;

•

ODDYSSEE-MURE Project (2017); MURE II Database;

•

ODYSSEE-MURE (2015); Energy Efficiency Country Profile: Malta;

•

ODYSSEE-MURE (2015); Energy Efficiency Trends and Policies in Industry;

•

Office of the Prime Minister (2016); The National Renewable Energy Action Plan 2015-2020;

•

Office of the Prime Minister (2017); Guidance Note on the Carrying out of Mandatory Energy Audits by non-SMEs;

•

Office of the Prime Minister (Energy and Projects) (2017); Malta’s National Energy Efficiency Action Plan – April 2017;

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Proposal for a DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL amending Directive 2010/31/EU on the energy performance of buildings;

•

Proposal for a DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL on the promotion of the use of energy from renewable sources (recast);

•

The Energy Efficiency Industrial Forum (2012); How many Jobs? A Survey of the Employment Effects of Investment in Energy Efficiency of Buildings;

•

Equinox Advisory Ltd.‘s internal Guidelines for conducting Economic Impact Assessments.

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10. Appendix I – Questionnaire

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Action Plan D2 – Socio Economic Impact and Policy Recommendations Purpose of document This document serves to inform market research carried out as part of the MBB’s Investing in Energy Project. The research will consider various elements relating to energy use by NonSMEs in Malta, relevant to policy obligations on both the Non-SMEs and Malta, resulting from EU Directives.

Background The EED (Energy Efficiency Directive), transposed into national legislation through L.N. 196 of 2014 obliged Non-SMEs to carry out energy audits, specified under the legislation, at least once every four years commencing with a 5.12.2015 deadline for the completion of the first audit.

The Malta Business Bureau acknowledged the following as implications arising out of this obligation: 1) Financial obligation on Non-SMEs: It is assumed that compliance carried a new business cost through the mandatory execution of high level energy audits within regular, predefined time periods. This obligation was not previously present, and while many Non-SMEs engaged consultant(s) or in-house services to identify energy improvements, the pre-transposition initiatives carried a lower cost for industry in almost all cases.

2) Demanding deadline for compliance: With only 18 months to complete an energy audit prior to the Directive’s deadline, this was a difficult timeline to complete high level energy audits in all 55 Non-SMEs. It was very difficult to achieve technically, without significant support and coordination between relevant bodies and stakeholders to: a. Ensure that a certification infrastructure was in place as soon as possible to allow for auditor training and certification; b. Ensure that Non-SMEs were aware of the deadline, availability of auditors following certification, financial impacts on their cash-flow, and with the audits subsequently planned accordingly; c. Ensure that as much utility as possible was taken from the obligations, given the financial cost on industry, to ensure that the money was invested wisely and not merely spent.

For the above reasons, the Malta Business Bureau joined the Energy and Water Agency and the Malta Chamber of Commerce in an initiative aimed at meeting points (b) and (c) above – point (a) was understood to be a priority by The Energy and Water Agency and was acted upon swiftly. To tackle (b) and (c), a voluntary agreement was drafted and agreed to by the MBB for Non-SMEs and the Energy and Water Agency. The agreement was a declaration of commitment from Non-SMEs to implement energy efficiency measures which made positive business cases, and for the Energy and Water Agency to support the Non-SMEs through

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informing them of available financial schemes relevant to their planned measures, and to share relevant planning and implementation best practice.

By February 2016 all Non-SMEs in Malta had complied with the legislation. Furthermore, 40% committed to implementing energy efficiency measures through the signing of a voluntary agreement.

The purpose of this study is to analyse the effect of this legislation on industry.

The cost of compliance constitutes an immediate effect. Since energy audits were carried out at the enterprises’ cost, this should be identified to inform future energy policy.

There is no legal obligation arising through either the EED or the Maltese transposition of this directive, for Non-SMEs to implement any of the measures identified through the energy audits. However, it can be assumed that the energy audits will give rise to recommendations which would be in the company’s interest to implement. It is therefore assumed that at least some of the recommendations would be taken up. This is a reasonable assumption since almost all Non-SMEs already implement energy efficiency upgrades on a regular basis.

Furthermore, 40% of Non-SMEs have signed a voluntary agreement to implement energy efficiency measures on a regular basis, indicating that the intention to implement such measures, and to consider recommendations arising out of legal obligations, is present to a high degree. The utility of the policy measure should be assessed.

Cross-fertilization should also be examined in terms of whether the implementation of Article 8 EED affects other energy legislation or vice-versa.

Cross Fertilization 5 instruments cover energy use within the EU relevant to industry. These are the: • Energy Efficiency Directive (EED), specifically Article 8 and the focus of study efforts • Energy Performance in Buildings Directive (EPBD) • Renewable Energy Directive (REDII) • Eco Design Directive • Eco Labelling Directive This research examines the effect of action taken by Non-SMEs as part of obligatory measures under the Energy Efficiency Directive Article 8. However, action taken as part of the EPBD or the REDII instruments prior to the energy audit obligation of EED Art.8, could impact on the said audit results by reducing the number of recommendations arising out of them. In the case where no action has been taken as part of the EPBD or REDII, recommendations arising out of EED Art. 8 compliance would also ensure meeting the EPBD and/or REDII targets.

The research carried out as part of this study will not yield any information relevant to the Eco Design Directive, as the Eco Design directive deals mainly with design and manufacturing obligations for equipment, whereas in this study enterprises are the consumers of said equipment. The Eco Labelling Directive also places obligations on manufacturers and dealers, which while facilitating compliance with other Directives, for the same foregoing reason this study doesn’t address.

This study could however, provide an insight into the effectiveness of both these Directives.

Since the Eco Design Directive came into force in October 2009, and the Eco Labelling Directive came into force in May 2010, it could be the case that amongst the targeted

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businesses within this study, measures predating these Directives will be addressed because of EED Art. 8 compliance. Given that several years have passed since the Eco Labelling Directive’s implementation, it is also likely that measures examined through the EED Art. 8 compliance will indeed already have Eco-Labels. If an additional data-set is gathered: whether systems identified through the EED Art. 8 energy audits recommendations for replacement have an Eco Label, it will then be possible to compare energy efficiency gains between those without and those with the Eco Labels. This will give an indirect indication of the impact of the related Directives – it can be expected that upgrades of equipment produced following the implementation of both Directives will yield lower savings than upgrades of equipment predating the Directives.

Energy audits arising out of EED Art. 8 compliance also consider operating systems and general energy use (ranging from electricity for lighting to production lines to fuel used for fleet transportation), in addition to building related uses covered under the EPBD. Since the EPBD places emphasis on heating and cooling, the latter is particularly relevant in Malta for industry and it can be expected that this study will identify heating and cooling as major areas for improvement. In that case, it will be clear that EED Art. 8 compliance also supports EPBD compliance. It will be interesting to note those premises which already have Energy Performance Certificates and the relation between certification and the number of certification related recommendations arising out of the energy audits, including: A) Thermal characteristics of the building; B) Heating installation and hot water supply, including their insulation characteristics; C) Air-conditioning installations; D) Natural and mechanical ventilation which may include air-tightness; E) Built-in lighting installation (mainly in the non-residential sector); F) The design, positioning and orientation of the building, including outdoor climate; G) Passive solar systems and solar protection; H) Cogeneration; I) Renewable energy; J) Management and balancing of internal loads.

The above list represents EPBD Annex I, which may not all be covered due to either auditor error or difference in audit criteria for energy audits arising out EED Art. 8 compliance. The study’s findings should also shed light on the move towards ‘zero-energy’ buildings in Malta

by Non-SMEs, through comparison of savings potential to planned measures. This will therefore inform EPBD Art. 1. D and Art. 9. It is also particularly relevant, given that the EPB target for new buildings to be zero-energy is 2020, and the state of preparation by Malta’s construction industry and policy framework vis a vis implementation is still very preliminary.

The research carried out as part of this study can also consider RES produced energy. This will allow an analysis of the importance of industry vis a vis meeting the REDII target of 10% RES energy for Malta.

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Questions 1) Did your company: a. Engage external energy auditors? b. Engage internal energy auditors in line with the conditions set under the legislation? c. Not carry out any further measures as it is already ISO 50,001/2 complaint?

2) Relating to your response in (1) was there any new/additional cost your company incurred in meeting the legal obligation arising out of L.N. 196 of 2014 (e.g. staff training, consultant engagement, replacement of old equipment, installation of new equipment not available before, etc.) and could you kindly provide a breakdown of such costs by area of intervention?

3) Could you kindly list the following for each measure arising out of the energy audit: a. Type of measure (e.g. lighting/heating/cooling/insulation/load balancing/load management) i. Is this a new measure or an upgrade? I.e. more efficient lighting versus the first-time installation of a Building Management System 1. If this is an upgrade, did the previous system have an eco-label? b. Cost to implement measure in EUR c. Potential energy savings arising should measure be implemented in KwH d. Is this measure: i. Already implemented in year: MONTH, YEAR? ii. Currently being implemented? iii. Not scheduled for implementation? iv. Scheduled for implementation in year: MONTH, YEAR? 4) If you ticked 3.d.ii could you provide a reason for your answer: a. Unacceptable ROI; b. Unavailable funding; c. Operational issues (e.g. machine line due to be changed shortly/premises to be changed/etc); d. Decision pending; e. Other – SELF COMPLETION. 5) Could you provide your annual energy consumption in KwH in 2015?

6) Could you provide your annual energy consumption in EUR in 2015?

7) Could you provide your annual energy consumption in KwH in 2016?

8) Could you provide your annual energy consumption in EUR in 2016?

9) Could you indicate an acceptable ROI figure for your company when it comes to energy-related investments?

EPBD related: 1) When was your building constructed?

2) Does your building have an Energy Performance Certificate? a. When is the certificate dated?

3) When was the last major renovation of your premises?

4) When is the next major renovation of your premises planned/due?

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REDII related: 1) Do you have any Renewable Energy Sources (solar/wind) producing installations?

2) If YES – what is the capacity of the plant?

3) What is your total roof area and how much of it is available for solar use?

4) Are you planning any solar energy installations over the coming two years?

5) If YES – what capacity of installation are you planning?

6) If NO – is there a particular reason?

NOTE – Green is data to be collected by the MBB from company reports submitted to The Energy and Water Agency. Other questions will be placed directly to Non-SMEs.

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Analysis outcomes This analysis will provide an indication of the Non-SMEs’ collective: • Annual consumption and energy bill for Non-SMEs collectively; • Cost of Article 8 of the EED to Malta’s Non-SMEs, including analysis of how many engaged external auditors, how many carried out internal audits, how many were in possession of ISO certificates whereby they already met mandatory criteria; • Savings potential expressed as a % of total consumption, in KwH, in CO2 emissions, in EUR; • Committed investment in terms of % of total consumption, in KwH, in CO 2 emissions, in EUR; • Unrealised savings resulting from inadequate funding in KwH, in CO 2 emissions, in EUR; • Comparison of achieved, planned and potential savings to national industry target.

ECONOMIST QUERY – is it possible to explore the jobs created through achieved projects, through planned projects, and through projects actualizing the potential? Would it also be possible to consider the multiplier effect of this investment in the sector, and of the potential investment in the sector?

EPBD • Number and percentage of commercial premises which are EPBD certification compliant • Number and percentage of commercial premises for which further EPBD related improvements have been recommended • Total energy and % improvement for commercial premises for which further EPBD related improvement have been recommended • Comparison of total energy and % improvement for EPBD related measures compared to EPBD target Eco Design and Eco Labelling Directives • Listing of types of equipment identified to be pre-legislative • Listing of total consumption of equipment identified to be pre-legislative and postlegislative • Listing of potential savings arising from upgrades to pre-legislative equipment and post-legislative equipment, comparison of the two to identify whether post-legislative is more efficient NOTE – this whole analysis is dependent on the response to question 3.a.i.1. This question could result in few returns due to records not being kept by Non-SMEs or misplaced, due to personnel change over or other similar reasons.

REDII • RES energy produced by Malta’s Non-SMEs - total and % of national actual and national target • RES investment by industry based on estimates of current prices • RES planned installations in terms of energy produced and % of national actual and national target • RES planned investment costs based on current prices

Page 112 of 112 EIA-0241-00001 Rev. 04 Project Title:

Investing in Energy Project - An Environmental-Economic Report on the Implementation of Energy Efficiency Measures by Industry

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RES potential for industry based on estimates of roof area available - total in terms of energy produced, % of national target • RES potential actualization cost based on current prices NOTE – through open interviews with a small sample of Non-SMEs it would also be possible to identify barriers to implementation of RES by industry as well as success factors. This might exceed the scope of this study, however if industry response is favourable and time-allowing, it could be considered.

ECONOMIST QUERY – is it possible to explore the jobs created through installed projects, through planned projects, and through actualizing the potential? Would it also be possible to consider the multiplier effect of this investment in the sector, and of the potential investment in the sector?

Method The MBB will prepare a final list of data to be gathered through desk research and Non-SME interviews. Following feedback from The Energy and Water Agency and Equinox, desk research will commence. On the conclusion of the desk research, the data will be entered into databases to prepare for analysis, and interviewing of Non-SMEs will commence. Following conclusion of interviews, data will be entered into databases, analysis and report writing will commence.

Timeline 17th February – Final list of questions available, desk research and Non-SME interviews initiate 5rd March – Desk research concluded 17th March – Non-SME interviews concluded, analysis commences 31st March – Report published This action was originally planned for a sample of Non-SMEs. However, for statistical purposes it has been decided to target a larger than planned sample. Therefore, the intention is to target all 55 Non-SMEs, with the aim of at least 32 fully completed datasets resulting. The above timeline is short for such research; however, it is feasible if interviews with Non-SMEs commence as the individual Non-SMEs desk research is completed. Depending on Non-SME collaboration, the 17th March deadline could require a two week extension, which would therefore push the publishing date to 14th April. This is considered acceptable from a project timeline view, given that instead of a sample the project shall be analysing all relevant data.

ENDS For more information: Geoffrey Saliba, Investing in Energy Project Manager, gsaliba@mbb.org.mt