What kind of ESCO model is RAK promoting under its retrofit programme?

We are adopting two different standards for energy performance contracting. One is the guaranteed savings model, where the owner invests, and the ESCO guarantees minimum savings. And the other standard is the shared savings model, where the ESCO invests and the owner shares part of the savings. When possible, we encourage the guaranteed savings model. We feel that the market is more mature for that model, but we are here to support participants in RAK in both cases and also to considering the shared savings model for some tenders.

Andrea Di Gregorio

Could you elaborate further on the incentives being offered by the Municipality for ESCOs to set up their activities in the emirate?

Part of our strategy is to reinforce the local market for the supply of energy efficient products and services. We looked at different segments and players to be attracted to RAK. Those players were also selected in coordination with the roadmap of implementation of the RAK Energy Efficiency and Renewables Strategy 2040. Clearly, the energy service companies and auditors are the entities we need to have from the early stages. The government is already engaged in a number of project evaluations, supported by Resolution Number 15 of 2018, issued by His Highness the Ruler of RAK promoting participation of the government in building-retrofit projects. This generates by itself a pipeline of projects, where ESCOs can participate. In addition, we are introducing monetary incentives through RAKEZ (Ras Al Khaimah Economic Zone) and DED (Department of Economic Development). For those ESCOs and EACOs that want to set up operations in RAK, the incentives are quite significant. RAKEZ decided to provide a discount equivalent to about 60% of the total local set-up fees, while DED applied a 100% cut, so they are completely waiving local fees. These incentives will be kept for a period of at least three years.

While incentives are certainly attractive, many ESCOs are curious to know as of the projects that will be available in the emirate, and their ability to bid for them. What sort of projects do you see in the pipeline for those willing to invest in activities within the emirate?

We have a target to retrofit 3,000 buildings by 2040 with comprehensive retrofits. We distinguish our comprehensive retrofits from the more specific type of intervention on a specific type of item, which will involve many more buildings. As part of this, we are generating an initial pipeline of projects within the government, because the government has precise targets for energy savings in the short term. There is another consideration, which is our tendering model to facilitate participation from ESCOs. As opposed to other models that have been adopted in the region, we are trying to simplify the participation of ESCOs. While all accredited ESCOs are called to express their interest in our tenders, only about five are chosen to submit a proposal, based on their capability-fit with the particular project. And that proposal will not require the execution of an investment grade audit. We just require an initial proposal based on a walkthrough audit, which will determine initial commitments on energy savings and investment. ESCOs can, therefore, benefit in two ways. One benefit is having more chances to win the tender because there would be a limited number of competitors called to submit a bid. And the other benefit is that the investment required from them at this stage is not high, as they just have to come to the site, look at the equipment, formulate ideas and propose. Once we see final responses, we select one ESCO to go into detailed discussions. Only then, the ESCO will be called for in-depth analyses, but at that stage, the ESCO has a high chance of getting a contract.

Will Ras Al Khaimah recognise other accreditations already achieved by ESCOs in other emirates?

To be simple, we accept and recognise accreditations granted by the RSB Dubai. Any ESCO accredited in Dubai, upon submission of relevant documentation and upon proof of being accredited by the RSB Dubai, will be automatically accredited in RAK. We don’t require additional paperwork. ESCOs who are not accredited in Dubai, can still apply for accreditation in Ras Al Khaimah by submitting a more complete set of documents. (To view
the documents, visit http://www.rakmunicipality.rak.ae/en/pages/rules-regulations.aspx)

From what we understand, ESCOs that get accreditation have to comply with certain parameters to ensure accreditation is renewed. Is there a move to implement a more stringent follow-up mechanism in RAK with regard to its accreditation, as well? 

The ESCOs that participate need to show continuity of activities. They will be requested to report on the projects they do in RAK. In fact, the reporting itself is a condition for the renewal of the accreditation. Also, the accreditation is renewed yearly for all ESCOs, and this makes it easy to enforce compliance to our accreditation criteria.

You mentioned that five ESCOs will be pre-selected to bid? How will they be segmented? Would it be based on the experience they have?

In principle, all will be involved, but ESCOs have different capabilities. Different ESCOs have different specialisations, different history of tackling different types of buildings. At the beginning of a tender, we ask for a very basic expression of interest from the ESCO, where they provide their experience on the type of project. Following that, we prioritise.

H.E. Munther Mohammed bin Shaker, Director General, Ras Al Khaimah Municipality

H.E. Munther Mohammed bin Shaker, Director General, Ras Al Khaimah Municipality:

“Awareness is an important area that we are working on, in multiple ways. As part of the programmes of the Energy Efficiency and Renewable Energy Strategy 2040, we are conducting workshops and trainings for stakeholders, consultants and other implementing entities. And as government, we want to lead by example by showcasing the benefits of our programmes through concrete, successful projects that will encourage adoption in the private sector. “We are increasing communication through social media, publications, events, etc. One example is the Model Villa Initiative. In partnership with Masdar, we are retrofitting the villa of a local resident free of charge in order to spread awareness among the local population and encourage them to adopt efficiency measures.”

Surendar Balakrishnan is the Editor of Climate Control Middle East magazine, and Co-Founder and Editorial Director of CPI Industry. He may be contacted at surendar@cpi-industry.com

Hannah Jo Uy is Assistant Editor at Climate Control Middle East magazine. She may be contacted at hannah@cpi-industry.com