Making Street Lighting ESCO Projects Work in Practice

Enhancing energy efficiency is one of the core EU goals determined by the 2012 Energy Efficiency Directive and thus mandatory for all EU member states. The ways of implementing the Directive’s energy consumption targets are set in national plans for energy efficiency. Quality street lighting is a public obligation towards the citizens due to personal and road safety and because of good visibility and urban feeling in populated areas. Street lighting installations are classified as simple constructions, which make them simpler for implementing energy efficiency-targeted measures. These projects are shorter and cheaper than other energy efficiency projects and thus are considered easier to implement for public authorities. Depending on national regulation of the EU member countries, street lighting projects are contracted under public procurement procedures as energy performance contracts (EPCs). The most important feature of EPCs is that the investments in energy efficiency renovation are repaid from the savings in energy consumption over the contracted period. This simple rule is nevertheless very complicated to implement in practice due to many reasons such as ownership rights on the street lighting infrastructure, insufficient public administration capacity for energy efficiency project implementation, insufficient funds, problems with energy efficiency improvement verification and measurement, complicated regulation on public procurement and/or energy service contracting, fiscal rules, etc. ESCO financing schemes have been promoted as innovative mechanisms for financing energy efficiency projects throughout the EU. Their popularity originates from the public sector indebtedness and inability to finance improvements in energy efficiency via traditional, budgetary project financing mechanism. ESCOs have been encouraged in the Western Balkans region by the international financial institutions and the governments. However, they are still not contracted smoothly in practice. This paper aims to investigate why. The chapter analyses regulatory and practical issues for energy performance contracting in Croatia with respect to street lighting renovation. The analysis includes, but is not limited to, public procurement and public debt rules. Based on the practical experience in implementing several projects for street lighting renovation, the chapter highlights the possible changes in energy efficiency regulation and practical approach to public authorities to make the ESCO projects in street lighting work better in the future.